Tax Reform and how it could affect payroll

Businesses across America are looking at the calendar and at tax reform-related news reports to figure out with each day’s delay how the (possible) coming of a broad new law, with provisions that go into effect on Jan. 1, 2018, can be factored into their 2018 operations.

High on the concern list: payroll. At present, employers, employees, and payroll professionals are like airline passengers sitting at an airport gate with the airline not being able to tell you when – or if – your airplane will take off. 

Payroll’s emergence as a pivotal issue in tax reform-related discussions is because it’s a function that involves every employee.  On payday, employees expect their checks. If they aren’t on time, an answer of, “The government is causing us a problem” may not calm employees’ concerns. Politico, which covers Washington D.C. politics, on Dec. 13 reported that among other issues surrounding the tax bill, “Payroll administrators worry they won’t be able to make changes to tax withholding by the first of the year.” That’s the fear shared with Congress by the American Payroll Association (APA).

The APA numbers 21,000 payroll professionals working 17,000 employers in manufacturing construction companies, and multiple other industries and fields. The APA wrote a letter to Congress dealing with its concerns about Jan. 1 effective dates, that was also referenced in a CNN story. The letter said, in part,

“Our members are already starting to panic, on behalf of themselves and millions of employees, about the effect on 2018 withholdings of a tax bill that will be effective a week after its enactment.”

If that occurred, paycheck changes probably won’t appear until late January, said a co-writer of the APA letter. And CNN said,

“Once a tax bill is enacted, the IRS has to review and incorporate all the changes into its new 2018 withholding tables, and issue guidance to payroll service managers on how to proceed. From there, the changes must be programmed into payroll systems. Big payroll service providers ADP and Paychex say that shouldn't be too hard for them. But it may be slower going for employers that do their own payroll."

Now that the historic tax reform package was approved by the Senate late Tuesday evening, it is going back to the House for final vote today. If it passes the House, we should know more about how this tax reform package will affect many areas in 2018, including payroll.

It's important that your changes in payroll are done correctly. We highly recommend speaking to a payroll professional or certified public accountant to ensure the changes are properly incorporated into your payroll system.


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Tagged Payroll, Tax Reform, Payroll Administration, Business Accounting, Tax Planning