GAO: 21% of Taxpayers Will Owe More in 2019 Due to Underwithholding

The Government Accountability Office said Tuesday that 21% of taxpayers will owe more in taxes in 2019 due to underwithholding after tax law changes that allowed Treasury and IRS to set the value of the withholding allowance for 2018. Under previous law, according to a Treasury estimate, 18% of taxpayers would have owed more.

As GAO explains in its report, Treasury and IRS Should Document the Roles and Responsibilities for Updating Annual Withholding Tables, Treasury analyzed various withholding allowance options and worked with IRS to revise the tables.

Updating annual withholding tables was routine in the past, but GAO states in its report that it made recommendations to ensure “effective annual revisions in the future.”

Senate Finance Committee Ranking Member Ron Wyden, D-Ore., and House Ways and Means Committee Ranking Member Richard Neal, D-Mass., asked the GAO in January to independently analyze the 2018 withholding tables and determine whether they would result in the underwithholding of federal taxes from employee paychecks.

In a Tuesday statement, Wyden said that the nonpartisan GAO report “is an alarm bell for the nearly 30 million households that are expected to owe more money come tax time this spring.”

Withholding tables, he said, “directly affect the size of paychecks earned by Americans all across the country, and millions of American taxpayers have gotten bad advice under this administration on how much to withhold. I agree with GAO’s recommendation that Treasury and IRS carefully document any changes made to these tables. The absence of a paper trail is an opening for future abuse.”

Wyden noted that GAO included a series of Treasury analyses in its final report.

Treasury projects the current withholding tables “will underwithhold taxes for 29.8 million individuals and families,” Wyden stated. “Families making $75,000 with two children and claiming the standard deduction are expected to pay twice as much in taxes due to overwithholding. Treasury estimates that only 6% of taxpayers will have accurate withholdings.”

In January, Wyden warned that the new tax law was being implemented with “brute force and speed.” Wyden and Neal raised concerns with the IRS in a letter that the Trump administration could be politically interfering with the development of the 2018 withholding tables.

GAO’s report examines Treasury’s and IRS’ processes for developing federal tax withholding tables, and the outreach Treasury and IRS conducted on withholding and how they assessed the effectiveness of that outreach.