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IRS Will Address 2013 Paycheck Withholding By Dec. 31

By Richard Rubin
December 21, 2012 3:26 PM EST

The U.S. Internal Revenue Service will issue guidance by Dec. 31 on paycheck withholding for 2013, as Congress continues to haggle over tax rates for next year.

“We are aware that employers have questions with respect to 2013 withholding,” the agency said in a statement today. “Since Congress is still considering changes to the tax law, we continue to closely monitor the situation.”

The IRS hasn’t said whether employers should plan to withhold taxes at the higher rates scheduled to take effect in 2013. Those higher rates would mean less take-home pay for workers starting as early as the first paycheck in January.

The American Payroll Association wrote to the IRS and the Treasury Dec. 17, asking the government to allow the use of current withholding rules into 2013.

Lawmakers in both parties agree that most taxpayers shouldn’t face higher income tax rates in 2013. They have deadlocked over what to do about top earners. That and other tax-and-spending issues have prevented a budget deal, and lawmakers won’t return to Washington until Dec. 27 to address the dispute.

Treasury Secretary Timothy F. Geithner has the authority to set the withholding tables.

In a Nov. 16 interview on Bloomberg Television, Geithner declined to say exactly what he would or wouldn’t do, and urged Congress to act.

“Don’t over-interpret what that authority gives me,” he said. “It does not give me the authority to give them, to let them avoid making some decisions on rates and policy.”

Freezing withholding tables could keep $10 billion per pay period in taxpayers’ pockets and prevent a loss of 1.5 percent of monthly gross domestic product, Mark Zandi, chief economist at Moody’s Analytics Inc. in West Chester, Pennsylvania, said last month.

To contact the reporter on this story: Richard Rubin in Washington at rrubin12@bloomberg.net

To contact the editor responsible for this story: Jodi Schneider at jschneider50@bloomberg.net

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