|
Workers will be getting more money in their paychecks
thanks to the Jobs and Growth Tax Relief Reconciliation
Act of 2003. New withholding tables incorporate the
lower tax rates for employers to use when figuring the
federal income tax to withhold from their employees’
wages.
Employers should use these new tables as soon as they
can work them into their payroll systems, but not later
than July 1, 2003. By the third week of June, employers
can expect to find in the mail a printed copy of the
64-page Publication 15-T containing all the tables.
(Because it takes some time to load online, you may
prefer to "right-click" on Pub.
15-T and save it to a drive.)
In making tax rate changes retroactive to the
beginning of 2003, Congress recognized that tax
withholding has already occurred at the higher rates
required under the prior law. The new law's Conference
Report states that "taxpayers who have been overwithheld
as a consequence of this (should) obtain a refund of
this overwithholding through the normal process of
filing an income tax return, and not through the payor."
Therefore, employers and others that withhold taxes
should not attempt to "correct" amounts withheld at the
rates required under the law before they could implement
the new withholding rates.
Employees may adjust their withholding to bring the
tax paid closer to the tax owed, but they may not claim
more allowances than they are entitled to, based on
their expected exemptions, deductions and credits. To
avoid an estimated tax penalty for not paying enough
during the year, they may want to see how much their
withholding drops before making further adjustments.
The new law extended the 10 percent rate to cover the
first $7,000 of taxable income for single persons,
$14,000 for married couples. It also lowered the tax
rates above 15 percent to 25, 28, 33 and 35 percent.
This is a drop of two percentage points for each rate
except the top one, which went down 3.6 points.
The new law also raised the standard deduction for
married couples to $9,500 and extended their 15 percent
tax rate to $56,800 of taxable income. Each figure is
double the number for single taxpayers. The changes
reduce the “marriage penalty” – the difference between
the tax couples pay and the amount they would have paid
as two single persons.
Related Item: Pub. 15-T, New
Withholding Tables (For Wages Paid Through December
2004) (PDF
324K)
For other information about the new tax law, see:
| 
