Hours after President Barack Obama
signed the bill averting the fiscal cliff, the Internal Revenue Service
issued new guidelines for employers on how much to withhold from
workers' paychecks this year.
Employers should start using the revised withholding tables as soon as possible, but not later than Feb. 15, the IRS said Thursday. Most employers will be able to comply with that deadline without trouble, according to the American Payroll Association, a trade group.
The IRS also reminded employers to start withholding 6.2% from paychecks for workers' Social Security taxes, up from 4.2% in 2012 and 2011. The increase is the result of the expiration of the temporary tax cut pushed by the Obama administration to help the economy rebound.
The payroll-tax break wasn't included in the new legislation, which extended most of the Bush-era reductions in income-tax rates. Those extensions avoided a significant chunk of the so-called fiscal cliff, the $500 billion in combined tax increases and spending cuts that had been scheduled to begin this week.
Other measures in the new legislation raised the top tax rate on wage and salary income totaling above $450,000 for couples and $400,000 for singles, and raised the top tax rate on capital gains and dividends for those households.
The IRS left unclear for now when taxpayers could begin filing their returns for last year.
Several months ago, the agency said its electronic-return filing season would begin this year on Jan. 22, a few days later than usual.
The agency said on Wednesday that it was reviewing details of the law and "assessing what impact it will have on this year's filing season." The IRS said it would soon provide "additional information on when taxpayers can start filing 2012 tax returns."
After passage of the tax bill, large tax preparers grew optimistic the agency would open for electronic filing around Jan. 22.
"The industry is sensing that that's doable, that there's no reason not to open on time," said Stephen Ryan, a lawyer with McDermott Will & Emery who represents a coalition of large tax-preparation businesses.
Taxpayers typically can start filing paper returns in early January, provided all their information and the necessary forms are available, preparers say.
But the IRS statement this week suggests that for now, it is better to wait until the agency provides more guidance on the filing season. In any case, paper returns are likely to be processed much more slowly than electronic ones.
Some industry observers now predict the tax-filing season might go forward with only minimal—if any—disruptions. That would be a relief after months of fretting about possibly lengthy delays if lawmakers didn't forge a deal on taxes.
In a reflection of the situation's urgency, Mr. Obama signed the legislation, known formally as the American Taxpayer Relief Act, by autopen on Wednesday while on vacation in Hawaii. An autopen is a signature machine often used for mass mailings.
Normally, presidents personally sign the official copy of new legislation, often at signing ceremonies. The White House move saved time by eliminating the need to fly the bill to Hawaii.
Only a handful of bills have been signed before by autopen. The procedure previously was approved by a 2005 Justice Department memo.
Source: http://online.wsj.com
Employers should start using the revised withholding tables as soon as possible, but not later than Feb. 15, the IRS said Thursday. Most employers will be able to comply with that deadline without trouble, according to the American Payroll Association, a trade group.
The IRS also reminded employers to start withholding 6.2% from paychecks for workers' Social Security taxes, up from 4.2% in 2012 and 2011. The increase is the result of the expiration of the temporary tax cut pushed by the Obama administration to help the economy rebound.
The payroll-tax break wasn't included in the new legislation, which extended most of the Bush-era reductions in income-tax rates. Those extensions avoided a significant chunk of the so-called fiscal cliff, the $500 billion in combined tax increases and spending cuts that had been scheduled to begin this week.
Other measures in the new legislation raised the top tax rate on wage and salary income totaling above $450,000 for couples and $400,000 for singles, and raised the top tax rate on capital gains and dividends for those households.
The IRS left unclear for now when taxpayers could begin filing their returns for last year.
Several months ago, the agency said its electronic-return filing season would begin this year on Jan. 22, a few days later than usual.
The agency said on Wednesday that it was reviewing details of the law and "assessing what impact it will have on this year's filing season." The IRS said it would soon provide "additional information on when taxpayers can start filing 2012 tax returns."
After passage of the tax bill, large tax preparers grew optimistic the agency would open for electronic filing around Jan. 22.
"The industry is sensing that that's doable, that there's no reason not to open on time," said Stephen Ryan, a lawyer with McDermott Will & Emery who represents a coalition of large tax-preparation businesses.
Taxpayers typically can start filing paper returns in early January, provided all their information and the necessary forms are available, preparers say.
But the IRS statement this week suggests that for now, it is better to wait until the agency provides more guidance on the filing season. In any case, paper returns are likely to be processed much more slowly than electronic ones.
Some industry observers now predict the tax-filing season might go forward with only minimal—if any—disruptions. That would be a relief after months of fretting about possibly lengthy delays if lawmakers didn't forge a deal on taxes.
In a reflection of the situation's urgency, Mr. Obama signed the legislation, known formally as the American Taxpayer Relief Act, by autopen on Wednesday while on vacation in Hawaii. An autopen is a signature machine often used for mass mailings.
Normally, presidents personally sign the official copy of new legislation, often at signing ceremonies. The White House move saved time by eliminating the need to fly the bill to Hawaii.
Only a handful of bills have been signed before by autopen. The procedure previously was approved by a 2005 Justice Department memo.
Source: http://online.wsj.com
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