Question: I'm disturbed by an item I saw in The New York Times on Aug. 1: "Thanks to a surprise Treasury decision, the impact of the July tax cut will not be as big as originally advertised. According to Citibank economists, the Treasury's desire to postpone larger deficits has forced it to decide that families earning more than $34,200 and individuals earning more than $27,800 would not receive immediately the 10 percent cut in withholding taxes." Can the Treasury Department really do that?

Answer: No, the Treasury Department really can't do that. Undisturb yourself, because that's not what's happening at all.

Let me begin by pointing out that the amount of tax withheld has no impact of any kind on your eventual tax liability -- but only on the timing of the payments. That is, you discharge your tax liability either by periodic withholding during the year, by making quarterly payments of estimated tax or by paying any balance due when you file your tax return -- or by some combination of the three.

The tax cut that went into effect on July 1 applies across the board to every taxpayer, regardless of the size of the paycheck. It is not affected in the long run by differences in withholding.

But that explanation doesn't get to the heart of your concern, which is the alleged delay in reducing withholding to correlate with the tax cut itself.

The withholding tables that the IRS designs represent an honest attempt to have employers withhold the proper amount of tax from each payment so that by year-end the total withheld will be approximately equal to the amount of tax liability.

Form W-4, the Employe's Withholding Allowance Certificate, provides enough flexibility for each taxpayer to tailor withholding to his or her own personal circumstances, to avoid either under- or over-withholding.

Now what really happened on July 1? Well, the old withholding tables provided for maximum withholding of 37 percent regardless of income--even though people at the upper end of the pay scale are likely to fall into the 50 percent marginal tax bracket.

Because the top tax bracket for earned income remains at 50 percent even after the July 1 tax reduction, the IRS kept the top withholding rate at 37 percent in the new tax tables.

Let's look at some numbers. For a married employe receiving $1,315 or more in bi-weekly pay, the amount of tax to be withheld under the pre-July table was $294.98 plus 37 percent of all wages over $1,315.

For the same employe after July 1, withholding on the basic $1,315 dropped to $268.08 -- but the new table continues to call for the same 37 percent for wages over $1,315.

That "overall" rate of 37 percent wasn't changed, because the average taxpayer with that kind of income is moving into the higher tax brackets where withholding has been traditionally too low.

Now look at these numbers: $1,315 biweekly pay times 26 pay periods equals $34,190 -- and the Times article says "$34,200." I'm sure they're talking about the fact that the top withholding rate of 37 percent was not changed on July 1.

As far as I can determine, the design of the new tables was entirely unrelated to the budget deficit. Instead, it was derived from Treasury Department experience with the earlier tables. And anyone who believes that more tax is being withheld than is warranted can always go the W-4 route to reduce it.

The last paragraph of the Aug. 16 column was inadvertently dropped. Because I think it had useful information, let's try it again:

During last winter's series on IRA's I mentioned a comprehensive booklet offered free by the trade association of mutual fund sponsors. (If you missed it the first time around, send your name and address to the Investment Company Institute/IRA Booklet, 1775 K St. NW, Washington, D.C. 20006.)

Now a neighbor of theirs has put together a similar booklet, also available free. Write to the American Council of Life Insurance, Dept. 735, 1850 K St. NW, Washington, D.C. 20006, and ask for the booklet "What You Should Know about IRAs."