If Congress doesn't act on the the Bush tax cuts until November, the IRS might have to advise employers to withhold income in January like its 1999 -- which is to say, as if taxes are at their higher, pre-Bush tax cut rates. The reason?
The IRS needs time to prepare and distribute tables used to calculate withholding taxes, and employers need time to implement them. Even though the Bush-era tax cuts don't expire until Dec. 31, the bureaucracy has to act sooner.
"It could be a paycheck or two until the new tables are implemented," if the IRS notices come later than November, said Scott Mezistrano, senior manager of government relations at the American Payroll Association in Washington. Last year, payroll departments were alerted in November, Mezistrano said.
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