Treasury and IRS release new guidance on tax withholding

The IRS and Treasury Department on Thursday issued new guidance on tax withholding from employees' paychecks, a key step in its implementation of the new tax law that President TrumpDonald John TrumpHouse expected to vote on omnibus Thursday afternoon House passes 'right to try' drug bill Spending bill rejects Trump’s proposed EPA cut MORE signed last month.

The new guidance will allow many taxpayers to start seeing bigger paychecks due to the new law. The IRS is instructing employers to implement the new withholding tables by Feb. 15.

"We estimate that 90 percent of wage earners will experience an increase in their take-home pay," Treasury Secretary Steven MnuchinSteven Terner MnuchinWhite House race to replace Hope Hicks has two lead contenders Overnight Finance: Congress struggles to strike funding deal as deadline nears | Immigration, ObamaCare, Gateway project divide lawmakers | FTC to probe Facebook | Mnuchin plays hardball on tariffs White House signals commitment to push for expanded online sales tax collections MORE said in a news release. 

The new withholding guidance takes into account a number of changes made by the new law, including the larger standard deduction, the elimination of personal exemptions and the new tax rates.

The guidance will work with the existing W-4 forms that employees have filled out. Mnuchin said the White House press briefing that Treasury and the IRS will release new W-4 forms for 2019 later in the year.

The IRS also plans to update the withholding calculator on its website by the end of February, so that taxpayers can see if they want to update their withholding.

"These new tables will help deliver the tax cuts as soon as possible to as many Americans as possible with as little disruption as possible," Mnuchin said.

Top Democratic tax-writers have expressed concerns that Treasury may have applied pressure on the IRS to underwithhold from paychecks so that taxpayers would see a bigger boost to their paychecks during this election year. Underwithholding would lead to taxpayers owing more when they file their 2018 returns next year.

Mnuchin pushed back against those concerns, calling it "another ridiculous charge.” He said the guidance is designed so that there's no material change in the number of people who will get refunds.

"We wanted to make sure that people weren't overwithheld or underwithheld, so we ran lots of models," Mnuchin said. He later added that he hopes Democrats "are focused on doing things that are good for the economy and the American people."

Senate Finance Committee ranking member Ron WydenRonald (Ron) Lee WydenOvernight Cybersecurity: Zuckerberg breaks silence on Cambridge Analytica | Senators grill DHS chief on election security | Omnibus to include election cyber funds | Bill would create 'bug bounty' for State Senate passes controversial online sex trafficking bill GOP senator blocking Trump's Intel nominee MORE (D-Ore.) expressed concerns about the pace at which the new tax law is being implemented.

“Republicans are using brute force and speed to implement a law that will deliver a financial blow to hardworking Americans all across the country,” he said in a statement. “I look forward to GAO’s independent review of these tables, which will expose whether the Trump administration is tampering with Americans’ paychecks, resulting in a whopping tax bill next year.”

But congressional Republicans cheered the announcement from Treasury and the IRS.

"When these new rates are implemented, the American people should check their paychecks to see how much more of their hard-earned money they will keep,” said House Majority Leader Kevin McCarthyKevin Owen McCarthyTrump can save Republicans and restore sanity to California in 2018 The Hill's 12:30 Report Snow scrambles Senate schedule MORE (R-Calif.).  

- Updated at 3:45 p.m.