On Monday, PenSoft, a provider of payroll services to small- and medium-size companies, delivered its 2018 software to thousands of customers — just in time for it to become out-of-date.
“There is a misperception that as soon as that bill is enacted, I hit an easy button and the software is updated,” said Stephanie Salavejus, chief operating officer of the Virginia-based company. “But I have to get those formulas from the IRS. I am sort of in a holding pattern.”
The chaos is likely to take months — and perhaps longer — to sort out as the IRS begins writing the rules governing the law’s implementation. The agency has already said it doesn’t expect the tax tables helping employers decide how much in federal taxes should be withheld from workers’ paychecks to be ready until mid-January, allowing them to be implemented in February.
“The IRS will be working closely with the nation’s payroll and tax professional community during this process,” the agency said in a statement.
But some tax experts are also concerned about the IRS’s ability to quickly address the mounting concerns. The agency has been attacked by Republicans for years and has seen its budget cut repeatedly, leading some to question whether it will be up to the task. When the IRS’s former commissioner, John Koskinen, stepped down last month, he blamed Congress for underfunding the agency.
“I don’t know how the IRS is going to enforce this stuff. They have to write regulations, give guidance to taxpayers. They are probably going to feel the brunt of this more than anyone,” said Willens, the tax attorney.
Any delay could sow doubts among taxpayers, many of whom, polls show, are already suspicious of the legislation’s benefits.
“Some employees are going to be anticipating that in their first paycheck in January, they are going to see this big tax cut, and that is not going to happen,” said PenSoft’s Salavejus. “There is still a lot of work to be done.”
Considering the complexity of the code and the breakneck speed with which Republicans rewired it, loopholes, drafting mistakes and unintended consequences in need of fixing are bound to pop up in the months ahead.
As the New York Times reported at the time, the months following enactment of the 1986 tax bill revealed “hundreds of mostly minor drafting errors . . . with more being found each week.” But to address the present-day problems, the GOP will need the help of at least nine Senate Democrats to address them, since Republicans there won’t have the benefit of the fast-track rules they used to pass the tax package with a bare majority. And as Democrats revealed Tuesday, they’re in no mood to help Republicans out of any messes they made.
“Given how intransigent they were on [a technical corrections package] for the Affordable Care Act, I’m skeptical Dems would bail them out of their mistakes,” a Democratic leadership aide said in an email.
That is, Democrats only recently found themselves on the other side of this problem.
Republicans refused to work with them on a package of technical corrections to Obamacare — a once-routine bit of legislative business after the passage of a major bill. Instead, a dispute borne of some sloppy drafting and the subsequent confusion over a four-word phrase in the law touched off a fight that went all the way to the Supreme Court. It involved who could qualify for federal subsidies to help people afford insurance under the law, and as The Washington Post's Paul Kane wrote in March 2015, a ruling against the administration could have undermined the financial viability of the entire program (the Court found 6 to 3 in favor of the law’s defenders).
The tax bill appears littered with potential potholes, suggesting Republicans will have plenty of patching to do next year. House Ways and Means Committee Chairman Kevin Brady (R-Tex.) has acknowledged as much in recent days, telling reporters on Friday, “I can’t imagine any major undertaking like this that doesn’t require technical corrections in the future.”