NATION Tax reduction finally arrives in most paychecks

Higher-paid workers will receive substantial boosts in pay.
PROVIDENCE JOURNAL
The amount that's withheld from your paycheck to cover federal income taxes is going down. That means your take-home pay will go up. But don't expect a windfall. Here's the deal:
The end of June was the deadline the government set for employers nationwide to reduce withholding for federal income tax.
Some employers have done it already; others are in the process. So if you haven't seen the impact in your paycheck yet, you will soon.
It's part of the mammoth federal tax-cutting legislation that Congress approved and President Bush signed into law in May.
More take-home pay
Because the new law has reduced federal income-tax rates and made certain other changes, there'll be less money withheld from your check for federal income tax, leaving you with more take-home pay.
And it'll happen automatically; you won't have to make any changes to your W-4 (the official government form through which your withholding is calculated).
How much of a savings will you see? Many workers will wind up with only a few dollars, if that, said Joseph P. Matoney, professor of accounting at the University of Rhode Island's College of Business Administration, in Kingston. "These aren't huge changes for most people," he said.
For other workers, the savings could be substantial. It depends largely on how much you're paid. "In general, the higher your income, the more tax you pay, so, under the new tax law, the more tax you'll save," Matoney said.
Smallest savings
Those who earn the least in wages pay little if any federal income tax, so they'll see the smallest savings. "I think the average person doesn't really pay that much in income taxes these days, so the change for them won't be significant," said Matoney, a CPA who also runs his own tax-consulting practice.
For example, a single worker who claims no exemptions and is on course to earn $25,000 in gross annual pay this year will see $1.11 more in weekly take-home pay.
But a worker in the same circumstances who grosses $60,000 this year will see a $13.95 boost in weekly take-home pay, according to Paychex Inc., which provides payroll and human-resource services to small and midsized businesses nationwide.
As a rule of thumb, the average worker might wind up with only a 2 percent hike in his or her take-home pay (depending on overall income and other factors), said Mark M. Higgins, a CPA, professor of accounting at URI, and co-author of "Concepts in Federal Taxation."
So you may wind up with only enough to "take yourself out to lunch twice more a month," he said.
As a general rule, only those who earn $50,000 or more will see meaningful savings, said Robert J. Sclama, former head of the Rhode Island Society of CPAs' federal and state tax committee.
For those who earn less, "it's going to be a very nominal amount," said Sclama, who runs his own tax-consulting and financial-planning business in North Providence, R.I.
"But each individual's tax situation is unique," so some may benefit more than others. Even two people who earn the same for the year may end up with different amounts withheld, depending on their circumstances (one could be married with children, for example), Sclama said.