One of Payroll professionals’ biggest holiday wishes may come true as early as next week.
That’s when IRS hopes to issue the 2011 withholding tables — or at least some guidance on what employers should do in their absence. Without these updated tables, Payroll’s left wondering how to withhold from that first paycheck of the year.
Problem is, IRS is still waiting on Congress to decide what to do about the expiring Bush-era tax cuts. That decision may come as early as next week, the agency’s John Cervantes told participants during a recent IRS-payroll industry leader conference call.
Most experts seem to agree that Congress will extend these cuts – even if just for a year, to give the decision-making process more time. However, any delay could mean smaller paychecks for employees right after the big holiday spending season. For example, if all the tax cuts expire and Congress doesn’t act fast enough or decides not to reinstate them, rates revert to 2001 levels. That means the:
- 10% bracket becomes 15%
- 15% bracket rises to 28%
- 25% bracket increases to 31%
- 28% bracket climbs to 36%, and
- 35% bracket shoots up to 39.6%.
If IRS doesn’t issue the tables (or guidance on how to proceed without them) soon, the agency may issue the 2011 edition of Publication 15, Employer’s Tax Guide, without the tables. You’d likely see a Publication 15-T, which would include new tables, issued later on.