As the White House takes its victory lap over the passage of the sweeping Republican tax overhaul, the IRS is scrambling to roll out new rules in time for 2018.
The country’s new tax system is to go into effect in 12 days, and already payroll processors say they are in “panic” mode as they try to figure out new withholding rules affecting millions of Americans.
The American Payroll Association, which represents 21,000 members and 17,000 employers, has written a letter to Congress complaining that its members were “starting to panic” about having to implement “herculean” changes in so little time.
It will be an uphill battle for the government, too.
The federal tax-collecting agency will be taking on the enormous rule-writing task without a permanent commissioner leading it. In recent years, the IRS has also seen its budget slashed and its workforce shrink, and has struggled to make tech upgrades.
The agency is likely to be challenged at every turn by tax attorneys and accountants watching how it implements the new code.
The IRS has also been the frequent target of the Trump administration and Republicans who have criticized it for being biased against conservatives.
But it’s this very agency, along with the Treasury Department, that will be responsible for writing new regulations on a range of items, from setting how multinational corporations are taxed on the profits they make abroad to changing the withholding tables for taxes in preparation for rate changes that'll take effect as 2018 begins.
The IRS said it has already taken “the initial steps” to prepare guidance on withholding in the new year.
“We anticipate issuing the initial withholding guidance in January and reflecting the new legislation, which would allow taxpayers to begin seeing the benefits of the change as early as February,” the agency said in a statement on its website. “The IRS will be working closely with the nation’s payroll and tax professional community during this process.”
The House Ways and Means Committee chairman, Rep. Kevin Brady, R-Texas, said he planned to sit down with the acting IRS commissioner, David Kautter, to discuss implementation of the tax bill and the agency’s needs, which could mean a boost in funding.
“What are the needs? We’ll start from there,” Brady told the Washington Examiner. “And then: Are (funds for implementation) available if they set the priority within their own agency and budget?”
Sen. John Thune, R-S.D., acknowledged there would likely be “bumps” on the road with “technical corrections to follow.”
Martin Sullivan, the chief economist at Tax Analysts, nonprofit publisher of tax notes, seemed to agree, telling Politico that some issues the government might encounter were “technical problems” but warning that others were "aggressive moves, where we’re going into the unknown in areas like international and on pass-throughs and doing things we’ve never done before.”