If Congress doesn't extend the Bush tax cuts in the first few weeks after the midterm elections, the IRS might have to assume that cuts will expire and ask employers to increase payroll deductions starting January 1. That means Americans might see smaller paychecks for the first few weeks of January -- the tough weeks after Christmas splurging -- even if the tax cuts are extended, if Congress acts too late:
"I've been doing payroll for probably close to 30 years now, and never have we seen something like this where it gets that down to the wire," said Dennis Danilewicz, who manages payroll services for about 14,000 employees at New York University's Langone Medical Center. "That's what's got a lot of people nervous. All we can do is start preparing communications with a couple of different scenarios." ...
For a married couple with an income of $80,000, that would drain an extra $221.48 in withholding from a semi-monthly paycheck, according to calculations by the Tax Institute at H&R Block. Married individuals earning $240,000 a year would lose an additional $557.78 to withholding in a single semi-monthly paycheck. The Tax Institute at H&R Block calculated federal tax rates for single-income earners and married taxpayers without children.
Read the full story at Bloomberg.