Payroll Personnel Could See Tax Bill Effects Soon

That’s because under the bill, cuts in income tax rates now scheduled for 2006 would occur immediately and could be reflected in reduced payroll withholding as early as July 1, according to a Los Angeles Times report. Changes in the tax brackets contained in the bill would save a single filer with $65,000 in annual income $741 in federal income tax.

Also, some 25 million low- and middle-income families with children could get refund checks of up to $400 per child as early as this summer while married couples would get a larger standard deduction when they file their 2003 tax returns. The dividend change would save a taxpayer in the 33% bracket $180 for every $1,000 in dividend income earned. Changes to the tax rates for capital gains – profits from the sale of assets – would save investors about $5 for every $100 they earn on stock investments.

Most of the tax cuts would take effect retroactively to January 1, but they would not stay on the books for nearly as long as the 11 years Bush proposed. To keep down the bill’s total cost, most provisions would be temporary.

Expiration dates were still being calculated Wednesday, but the tax cut on investment income would likely last until 2007. Meanwhile, tax credits for families with children, tax relief for married couples, and new incentives for businesses to invest and expand probably would last no more than two years. The accelerated income tax rate cuts would expire in 2011.

House and Senate negotiators on Wednesday agreed to the plan to cut taxes and provide aid to financially struggling states, capping months of debate over how much to scale back Bush’s more ambitious plan to spur economic growth.

The compromise bill is expected to clear the US House of Representatives and the Senate and go to the White House for Bush’s signature before week’s end. It calls for about $315 billion in tax cuts, $20 billion in aid to states and about $15 billion in refunds for low-income families with children.