One major topic discussed during the 2018 tax season was the decrease in refunds people were seeing, or even worse, owing when they usually get a refund. This came as quite a surprise to most of the population as the new tax reform was promising to cut taxes for most of the population. The biggest problem was not that people were seeing tax cuts, they were, but rather that they weren’t getting the refund they were used to.
Most people’s tax situations haven’t changed over the last year as far as fluctuations in income, but what did change was the withholding amounts in response to the tax reform. Since most of the population would be paying less in taxes over the year, the population didn’t need to withhold as much as they needed to in the past. This change in withholding tables resulted in larger take home pay for individuals but created quite a fuss come tax time.
For someone who is a W2 employee and withholds funds from their paycheck to the IRS, they could be used to withholding $500 per paycheck. Even if that same employee never changed their withholding rate from year to year, since the withholding tables changed, that $500 withheld probably moved to $450 withheld. This resulted in more pay to the employee come pay day but resulted in less paid into the IRS come tax time. That $50 per paycheck might only be noticed the first or second time it is paid to the employee and then they forget about the change as it is not affecting their day to day lives. That $50 adds up over the course of the year however, and that same employee will definitely notice when their refund is cut by over $1000 at once.
That was just a small example of what was happening to millions of taxpayers across the country. This isn’t all bad news however, 92% of taxpayers were to see a tax cut. So even though the taxpayer didn’t get the refund they had hoped for, they most likely paid less in taxes for the year due to the tax cuts. So just because the taxpayers didn’t get the same refund as they hoped, it doesn’t mean the tax reform didn’t help them.
If you would like to go over your return and find out why your refund wasn’t what it was in the past, we would be more than willing to sit down with you. Most of the time, with a few simple changes, we can get your refund right back to where it was before. Give us a call before it is too late and allow us to prepare you for the upcoming tax season.