NEW WITHHOLDING TRANSLATES TO `PAY LATER'

Most middle- and low-income wage earners will see a significant reduction in their tax refunds for the 1992 calendar year.

"Or worse, they may even owe some additional taxes when they file next year," said Lee E. Kimmel, district manager of H&R Block Inc., 1471 N. Kingshighway.

"Some taxpayers don't mind a reduced refund or even owing the government a small amount at the end of the year," said Kimmel. "But millions of taxpayers count on their annual refund, and like the idea of a lump sum of unbudgeted money they can save, use for real estate taxes, or spend as they please."

There is a tradeoff, said Kimmel.

"The tradeoff is that each paycheck in 1992 will be a little larger," he said.

The new turn of events on the income tax scene comes as a result of President Bush's election-year offer of a bit more take-home pay now in exchange for smaller tax refunds next year.

The change generally took effect March 1.

"Basically, some people have misunderstood the plan," said Kimmel. "They keep thinking that this is a tax reduction.

"It's not a reduction," emphasized Kimmel. "They have a few dollars more take-home pay now, but at year's end there may be some disappointed taxpayers."

Tom Bloch, president of H&R Block, headquartered in Kansas City, said the big problem will be for workers who are unaware that the extra dollars now may have to be repaid at the end of the year.

The changes to the withholding tables used by employers to determine the amount of federal income tax to withhold from each employee will reduce or even eliminate refunds next year.

"You can, however, still protect your refund," said Kimmel. "The new withholding tables went into effect March 1, but you can still request your employer to hold out additional taxes from each paycheck."

Large numbers of American workers are saying "thanks, but no thanks" to the plan, which Bush proposed in hopes of injecting an extra $2 billion a month into the economy.

An informal survey conducted recently by The Associated Press of large employers and payroll-preparation services shows that in some companies nearly half the workers are filing the new W-4 forms to keep income-tax withholding at last year's level.

How much money is involved? It depends on your circumstances.

The largest impact will be felt by workers in the low- and middle-income ranges.

"If you earn less than $47,000, and your withholding is at the single rate, you'll lose about $172 of your refund, or owe $172 more," said Kimmel. "On the other hand, you will have about $3 a week more in your pocket."

If you earn less than $78,700, and your withholding is at the married rate, you'll lose about $350 of refund for each job. For example, a married couple, each working one job, would lose about $690 of refunds.

The effect of the new tables is phased out between $47,500 and 53,200 for the single withholding rate, and between $78,700 and $90,200 for the married rate. That is, if you earn more than $53,200 (single rate) or $90,200 (married rate) at each job you hold, you're not affected by the changes.

To determine how you'll fare at tax time next year, start with your refund or balance due this year.

Suppose a husband and wife had a refund of $450 this year, based on both working and tax withholdings at the married rate. Next year, if the couple's work and financial situations stay about the same, the couple will owe $240. Of course, the couple will have an extra $13 a week to spend throughout the year.

If you're a taxpayer who likes a refund, here's what you can do: Complete a new Form W-4, available from your employer, for each job you hold, using the same number of allowances on line 5 as you currently claim on the W-4 on file with your employee.

The accompanying table tells you about how much additional withholding you'll need to keep your refund about where it was for 1991. Add the amount from the table to whatever amount (if any) you already show on line 6 of your Form W-4.