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Payroll Today

Side-by-side comparison of House and Senate payroll tax provisions in tax reform bills

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Alice Gilman

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in Payroll Today

The Senate and the House of Representatives have been in full tax-reform mode since November. You can read about that process here, here and here.

The Senate and the House have now voted on their respective tax reform bills, so we can do a side-by-side analysis of the payroll provisions they included.

Suffice it to say, the bills alter the landscape for everyone’s personal income taxes, by doubling the standard deduction and repealing or amending various tax credits and deductions. Upshot: Employees will need to consider carefully how these bills affect their personal taxes and whether they must or should refile their W-4s with you to account for these changes.

What’s next: As you can see from the payroll provisions only, the bills differ markedly, so they will need to be reconciled before Congress can vote on a final bill.

Reconciliation is usually a formal process. A committee of delegates from each house sits down and hashes out the differences. In fact, the House appointed its delegates yesterday evening. But it doesn’t necessarily need to be so complicated or take a long time. In their zeal to get something passed by the end of this month, a more informal reconciliation process may be used.

What are the 2018 withholding tables and withholding allowance amounts? An IRS spokesperson commented that Congress must pass a final tax reform bill before it can release the 2018 withholding tables and withholding allowance amounts. Circular E and its spin-offs will probably be delayed, as well.

√ PAYROLL PRACTICE TIPS: The key payroll changes in both bills would become effective on Jan. 1, 2018, which means that you will have precious little time to adjust your payroll system. This isn’t ideal, since you’ll be dealing with year-end and quarter-end responsibilities. Now is the time to line up your resources for implementing the changes that will be required under tax reform.

And remember, any changes to the definition of taxable wages at the federal level will impact states that tie their definition of taxable wages through IRC conformity laws. States can do this in several ways—they can automatically tie their tax provisions to the IRC, they can tie their tax provisions to the IRC as of a specific date or they can tie only specific provisions to the IRC as of a specific date.

These states have automatic IRC conformity laws, which means that you should be prepared to make changes to state income tax withholding on Jan. 1, 2018, as well: Alabama, Colorado, Connecticut, Delaware, District of Columbia, Illinois, Kansas, Maryland, Massachusetts, Missouri, Montana, Nebraska, New York, Oklahoma, Rhode Island and Utah.

Here’s a side-by-side comparison of the House and Senate tax reform bills.

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