The uncertain future of the Bush tax cuts is causing chaos on several levels. Case in point: The IRS says that new 2011 income tax withholding tables will be delayed until it can figure out which way the wind is blowing.
Normally, withholding tables for the upcoming tax year are released by mid-November of the current year. But the scheduled repeal of the so-called Bush tax cuts on Jan. 1, 2011, would result in higher withholding (and reduced paychecks) for most taxpayers.
Unfortunately, it takes time to update payroll systems for the changes. One possibility: Employers may be granted a brief “grace period” based on 2010 rates until Congress passes—or doesn’t pass—new legislation. Stay tuned.