New Tax Withholding Tables
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.
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.
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