Treasury rejects claims

Treasury rejects claims it manipulated tax withholding

By BRIAN FALER

The Treasury Department has strongly rejected complaints by congressional Democrats that it manipulated tax withholding last year in order to boost workers’ paychecks ahead of the midterm elections.

“There was absolutely no manipulation of the [withholding] tables and no ‘phantom windfall’ in taxpayers’ paychecks,” J. Brady Howell, a senior adviser in the department’s office of legislative affairs, wrote Sen. Ron Wyden (D-Ore.), the top Democrat on the Finance Committee, on Monday.

“The assertion that these dedicated civil servants manipulated the system for political purposes is misinformed, baseless and false,” wrote Howell.

The letter comes as early tax-refund disbursement data show that both the share of taxpayers receiving payments from the IRS and the average amount they’re getting back is down significantly. Many experts say, though, it’s too early to draw many conclusions from the data.

This year’s filing season is being closely watched because it is the first time the public is filing under the new tax law, H.R. 1. Some taxpayers have been surprised to learn their expected refunds are smaller than they anticipated or gone altogether.

Democrats have accused the administration of engineering withholding tables so that workers received more money last year, which is now cutting into their refunds. That, Wyden said, could leave some people vulnerable to IRS penalties for underpaying their taxes.

“This is tax penalty entrapment,” said Wyden.

Howell countered that, “The construction of the tables was exactly the same for 2018 as in prior years." He also said the IRS did “extensive outreach” to taxpayers who may not have realized they needed to double check their withholding in the wake of the law, and eased those underpayment penalties.

“Tens of millions of taxpayers are under-withheld every year, due to taxpayers’ choices or the difficulties some taxpayers face in adjusting withholding to account for changes in their circumstances,” he added.