MW Treasury Secretary Bessent wants Americans to take this simple step to increase their paychecks. Should you do it?
By Andrew Keshner and Victor Reklaitis
Will taxpayers actually feel a boost from reducing tax withholding on their paychecks in the new year?
Treasury Secretary Scott Bessent has been predicting that Americans will see a boost in their take-home pay in the new year from reducing the tax withholding on their paychecks.
President Donald Trump's Treasury secretary just can't stop talking about tax withholding.
In interviews this fall, Scott Bessent has repeatedly said he expects Americans to ring in the new year in part by reducing the amount of federal income tax that they hand over in every paycheck, with the move triggered by the tax cuts in the GOP's One Big Beautiful Bill Act.
For example, Bessent told Fox Business in late October that Americans will make the change in 2026 after having kept their withholding levels the same in 2025, even as the Republican megalaw resulted in new deductions for workers with tipped income and overtime pay, along with a new tax break for seniors.
"On Jan. 1, working Americans will reset their withholding levels, and they will have substantial real income increases," Bessent said. He repeated the point in a Fox News interview on Nov. 15, saying Americans "will change their withholding, and they will get a bump up in their real incomes." He made similar comments on Nov. 5 and Nov. 12.
Is Bessent right that Americans will be making this adjustment in the new year? What should you do? And will people feel a real boost? It may depend on your job, and whether you can stomach a tax bill if the numbers don't work in your favor.
"This is an opportunity for the right type of employee in the right position with the right desire and the right risk tolerance," said Zachary Keep, manager of compliance risk at Paychex $(PAYX)$, a payroll-services provider. "Like anything, there is a little bit of risk there."
Some tax experts have expressed skepticism about Bessent's comments and the extent to which there will be a widespread boost.
The majority of taxpayers interact with the Internal Revenue Service once a year at filing time and don't do annual adjustments to their tax withholding, according to Kyle Pomerleau, a senior fellow focused on tax policy at the American Enterprise Institute, a right-leaning think tank.
The country's tax code relies on a "pay-as-you-go" approach, where households incrementally pay their share of income taxes through the year. It's usually through withholdings that are automatically subtracted from a paycheck.
To update withholdings, hourly and salaried workers would have to change what's on a Form W-4, the employee's withholding certificate. Self-employed people or others who make quarterly estimated tax payments would have to alter their payment amounts.
In addition, some of the reactions to 2017's Tax Cuts and Jobs Act suggest that many taxpayers might be more focused on tax refunds, Pomerleau noted.
The TCJA led to automatically lowered tax withholdings for many employees, as Trump administration officials instructed employers to implement new withholding rates in early 2018. But that then led to some taxpayers getting lower refunds in early 2019, and some even believed erroneously that the TCJA had raised their taxes, Pomerleau told MarketWatch. The AEI expert said he's "not sure if they are going to make any other changes that would create a 2018-2019 TCJA situation." Six years ago, some frustrated tax experts stressed that Americans should focus on the decrease in their total taxes, not the decrease in their refund.
This year's withholding tables will not be changed in the wake of the One Big Beautiful Bill Act, according to the IRS.
Corey Husak, the director of tax policy at the Center for American Progress, a left-leaning think tank, said he thinks it's "a bit of a fanciful notion" that there will be "a common experience" of Americans changing their tax withholdings on their paychecks. He estimated that, while more than 100 million tax returns are filed each year, the tipped-income provision helps only about 3 million Americans - and the one on overtime affects about 10 million - it's tough to predict tipped income and overtime income. Husak said it's more reasonable to expect that Americans helped by the new tax break for seniors could make more accurate predictions and adjust their withholdings.
The IRS released guidance Friday for taxpayers on reporting their tips and overtime pay under the new deductions. There are around 6 million workers who report tipped wages, according to the tax collector.
E.J. Antoni, chief economist at the Heritage Foundation, a right-leaning think tank known for its support of Trump's policies, emphasized that there should be some level of Americans changing their withholdings, especially as larger tax refunds are expected in the new year.
"I don't think anybody expects that every single person who's eligible to change their withholdings or should change their withholdings is going to do so. However, some people obviously are," he said. "Then, when it comes time to get your refund, more people are going to be clued in to the fact that they got a much bigger refund than anticipated and they should, as a result, change their withholding."
The Treasury Department did not immediately respond to a request for comment.
Analysts at Piper Sandler have said they expect many Americans will be surprised by large refunds in the upcoming tax-filing season, as there could be a total of $91 billion in additional refunds due to the GOP megalaw. Taxpayers could score a total of about $30 billion from reduced withholding in 2026, Piper Sandler's team said in a note. The overall boost per taxpayer could average about $1,000 and will be "substantially more for some filers," the analysts said.
Tax experts, regardless of their political affiliation, say it's a good idea to look into your withholding level each year.
"What the IRS does explicitly say is they recommend that people actually check and adjust their withholdings every year if necessary," Heritage's Antoni said. "What we do know, in terms of publicly available data, is roughly three-quarters of taxpayers get a refund every year, and that means they're usually - not always, but usually - withholding too much."
So far, the IRS has paid an average $3,052 refund on 2024 tax returns, according to the agency's data through mid-October.
It's a good financial habit to check your withholding, and a "good time to do that is when you just complete your taxes for the previous year," said Husak from the Center for American Progress. He added that it's no surprise that people "don't always have time to do this, and they think, 'Well, next year at tax time we're going to settle up anyway, so why would I take my time out now - tax filing is already enough of a process.'"
Pros and cons of changing withholding
Many people have a "set it and forget it" approach with their withholding amounts. For example, 29% of people said it has been at least a year and another 21% said they haven't touched it since starting with their current employer, according to a 2024 survey from the tax preparer Jackson Hewitt.
The reluctance to tweak is understandable. Someone who withholds too much compared with their tax liability will end up with a refund. Someone who withholds too little will have to pay the remainder of their tax bill - possibly also penalties and interest if they withheld far too little.
Most people set their withholdings at the start of a job "and probably never touch it again," said Keep of Paychex.
Keep hasn't seen noticeable upticks in people changing their withholdings after the new law, he said. "I don't think workers are running out to alter this."
To be sure, the new tip and overtime deductions may give certain workers a reason to reduce their withholdings and increase their upfront pay, he said.
But it's "almost like an investment decision for an employee," which includes benefits and downsides. The upside is a bigger paycheck sooner, while the pitfall is a chance of owing money at tax time, he said. "Only then do you know if your math was good."
There are online withholding estimators people can turn to, including one from the IRS. However, the IRS estimator cautions that its estimator is not currently able to calculate the tax impact of overtime and tipped pay.
Kathy Brown, lead tax agency relations analyst at the payroll and benefits administrator UKG, strongly advised against trying to change withholdings on their own at this point. She also hasn't seen many people changing their withholdings after the law's passage. Anyone who wants to consider the tactic should have help from a tax professional, Brown said.
Workers may miss the nuance of tip and overtime tax deduction rules, and they may overlook other income sources the IRS counts as taxable, Brown noted. "Be very strategic in how you determine what amount - if any amount - you want to change," she said.
-Andrew Keshner -Victor Reklaitis
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November 21, 2025 11:02 ET (16:02 GMT)
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