Source: Teri Webster
Government income tax cuts, as promised, increased take-home pay for many people this year. But the downside is that tax returns are shaping up to be smaller.
How much smaller?
On average, returns are about 8.4 percent smaller this year. Specifically, the average tax refund this year is $1,865, or $170 smaller than last year’s average of $2,035, according to IRS figures. The IRS data compared the cumulative statistics of Feb. 2, 2018 and Feb. 1, 2019, according to published reports.
“While some people likely noticed an uptick in their take-home pay, the amount might have been small enough that people didn’t notice, especially those who get direct deposit and might not look at their pay stubs,” NBC News explained.
The increase may have gone completely unnoticed for workers who had an increase in health insurance or another payroll deduction.
One reason it’s happening is due to adjusted tax withholding tables under the Tax Cuts and Jobs Act passed in 2017. This marks the first year the changes went into effect.
Some people could even end up owing money.
“There are going to be a lot of unhappy people over the next month,” Edward Karl, vice president of taxation for the American Institute of CPAs told Politico. “Taxpayers want a large refund.”
To date, the IRS has received 12.4 percent less individual income tax returns than it did at this time last year, according to published reports. In all, $8.713 billion in tax refunds have been paid this year to 4,672,000 taxpayers. At the same time last year, 6,171,000 taxpayers received $12.560 billion in returns.
What can be done?
To avoid future surprises, it’s best to check your withholding amount — the income tax that your employer withholds and sends to the IRS. A key time to check that amount is when big adjustments are made to tax laws, according to the IRS.
The Government Accountability Office reported in August 2018 that about 30 million people (or 21 percent of taxpayers) were not having enough withheld for taxes.
“Just over 2 in 10 taxpayers will owe money to the IRS next year,” CNBC reported.
Additionally, an estimated 5 million people who received a refund last year will not get one this year.
“It’s a problem if taxpayers don’t understand they received that additional money via larger paychecks during the year,” George W. Smith IV, a certified public accountant, told the Detroit Press. “We tried very hard to educate our clients on this during the year.”