Decision on extending Bush-era tax cuts could affect paychecks
Posted October 29, 2010 2:51 p.m. EDT
Updated October 31, 2010 1:07 p.m. EDT
Raleigh, N.C. — For those who have been laid off, they know what it's like to not have much, if any, disposable income. Now, taxpayers might have to tighten their belts even more.
Tax cuts initiated by President George W. Bush are set to expire at the end of December, and Congress has not yet voted on extending them. The IRS will publish its 2011 withholding tables in the next few weeks, likely assuming the cuts will expire. That means an across-the-board tax increase for everyone.
For example, a married couple earning $80,000 a year will have an extra $442 withheld each month, according to The Tax Institute at H&R Block.
Even if Congress votes in the next couple of months to keep the cuts, it may take weeks to implement the new tables. That would affect the first few paychecks of the new year. But the current Congress may do nothing, letting the next Congress take up the matter when it convenes in January.
Rich Kirk, who runs Complete Payroll Services in Raleigh, said employers need to warn employees that paychecks will probably be smaller in 2011.
“(You should) hope your employees don't ask for a raise to make up for what the IRS is taking,” he added.
Kirk says people could file new W-4 forms with their employers to claim more dependents and reduce their withholding, but that's a gamble. If Congress does not extend the tax cuts, they would end up owing that money in 2012.