Companies across the nation are starting to worry that workers will see an unwelcome increase in their withholding come January. Congress hasn’t decided on whether or not to extend the Bush era-tax cuts. If they are allowed to expire, then the Treasury Department might delay the release of tax withholding tables. Payroll administrators warn that this scenario means millions of people will see their tax bills inflate by the April 15th filing deadline.
As reported in the Wall Street Journal, Treasury typically releases withholding tables in mid-November. These tables are distributed to all business and payroll providers to calculate the amount of taxes withheld from paychecks. Higher withheld taxes mean lower take-home pay for American workers. In tough economic times, any reduction to take-home pay is likely to be met with public outcry.
The Treasury Department could just assume that Congress will eventually extend the Bush-era tax cuts, at least for the middle-class, and issue the withholding tables for 2011 as if that were the case. But, if Congress then failed to extend tax relief workers would have too little withheld from their paychecks and see large tax bills come the April 15th tax filing deadline.
If Treasury follows the current law and issues the 2011 tax withholding tables as if the tax relief expires, then workers will see a large decrease in their withheld taxes and lower take home pay.