For many doing their taxes, there’s an unpleasant surprise waiting in the form of smaller refunds or unexpected taxes owed to the IRS. The changes are due to the new tax law that went into effect.
The numbers are based on the early returns being reported by the IRS. The changes made a lot of taxpayers unhappy. According to the IRS, the average return this year is 8 percent lower than it was last year and tax preparers say some people are shocked.
Raleigh based CPA Rob Davis said his clients are finding “refunds are less than what they expected, and in some cases, they’ll end up paying more taxes than they did last year.”
The frustration over the tax law changes has been evident on social media.
For example, many people posting to Twitter with the hashtag #taxrefund are fuming over the tax law change that reduced their refunds or ended up making them owe the IRS money. It was a difference in thousands of dollars in some cases.
“Many were helped by the new tax law, but it was not equal distribution,” said Davis. “Some ended up paying based on their unique situation, or ended up paying more taxes in 2018 than they did on their 2017 tax return.”
Why? The General Accounting Office says when the tax law changed, 21 percent of taxpayers didn’t withhold enough on their W-4 forms. That translates into 30 million people who’ll owe the IRS this year, which is 3 million more than under the old tax law.
“When they adjusted the tax code, the IRS also adjusted the tax withholding tables so people saw a slight increase in their take-home pay,’’ said Davis. “If you spread it out over the entire year, they had less tax withheld.”
Which, combined with changes in allowable deductions and other tax-law reforms, meant smaller refunds or even taxes which now owed to the IRS.
The General Accounting Office warned that might happen in a report issued after the new tax law went into effect.
Anyone paying instead of breaking even or being owed a refund can work with a tax preparer to adjust W-4 withholdings. Also, money owed to the IRS can be paid in installments. A tax preparer can help create an installment plan, which requires IRS approval.