Most every American has heard that the federal government has passed comprehensive tax reform, but not very many understand the immediate and annual impact to their total tax burden.
Unfortunately, there are politics at play here, too. One of the concerns is the partisan tug-of-war between potentially over-juicing people’s paychecks for the mid-term elections—only to leave a bunch of Americans with an unexpected tax bill come next April—as well as the potential for demonizing Americans’ take-home pay that’s rightfully theirs.
The IRS itself which is wrangling with how exactly to update their tax tables based on a range of factors. Specific weekly withholding calculations based on tables issued by the IRS has always been a moving target based on the idea that most Americans like getting at least some kind of refund each year.
Adding one more unknown variable to the equation is the potential for individual states to create tax gift loopholes that limit the practical effect of repealing certain kinds of State and Local Taxes.
Long story short, like always, there is no perfect answer. But there are also more accurate and less accurate estimates. And there’s a question both of how much but also how quickly these decisions should be made.
And here’s our point: These unknown variables and many others built on real-life situations are one thing that—no matter how sophisticated the software and hardware technology gets—this is one thing that computer accounting can’t help with.
There is always a human element. Whether by the rule of man or the rule of law, there is always a human element.
Of course, there’s still plenty that computer accounting can help with. And chief among them is responding to new developments, evolving circumstances, and previous errors—without having to redo the entire accounting system.
Let’s say come next April, your company or one of your clients has a handful of angry employees who are unexpectedly facing an end-of-year tax liability—despite the fact that you accurately calculated their payroll withholding based on the IRS tax tables.
First, you’ll have to apologize for the inconvenience and clearly explain that the issue was with the IRS calculations and other intervening circumstances, not an error in the payroll withholding calculations.
Now, if you or your accountants did make mistakes, that’s a different conversation.
Otherwise, with some of the best computer accounting software, you can quickly update and recalculate this year’s withholding amounts so that this isn’t an issue for your employees again.
Problem addressed, and everybody moves on. Even with certain limitations, stuff like this is a huge advantage of computer accounting.