Financial experts say there’s no reason to panic if your tax refund is smaller this year


tax refund small upset

Tax Day 2019, the last day to file your 2018 tax return, is Monday, April 15.
It’s the first tax season under the new tax law President Donald Trump enacted in late 2017. It was the most significant overhaul of the US tax code in 30 years.
According to IRS data, the average federal tax refund amount is down about 8% from last year, to $1,865.
If you receive a smaller refund or owe money to the IRS, it’s not an indication that you’re worse off financially, according to financial experts.

We’re two weeks into the 2019 tax filing season and refunds are starting to roll in.

According to IRS data, the average federal tax refund amount is down about 8% — to $1,865 — for the first week of the 2019 filing season compared to the same window last year. The total number of refunds issued dropped by 24%.

Smaller refunds are a likely result of the new tax law President Donald Trump enacted in late 2017, which was the most significant overhaul of the US tax code in 30 years. The tax law instituted new guidelines for how much employers should withhold from employees’ paychecks for taxes, resulting in an increase in take-home pay for about 90% of Americans, Business Insider’s Bob Bryan reported.

Employees who didn’t adjust their withholdings after the new guidelines were released could be receiving a smaller refund than they expected this year, Mark Jaeger, the director of tax development at TaxAct, told Business Insider.

Read more: Here’s when you can expect your tax refund to hit your bank account, according to the IRS

“Depending on a filer’s tax situation, they may not get as large of a refund this year as they’re used to if they didn’t adjust their withholdings in 2018. That said, they shouldn’t immediately be alarmed if that’s the case,” Jaeger said.

“Many filers received a boost in their paychecks throughout 2018; that’s where the remaining amount of their refund went,” he said. “Instead of waiting to receive their money as a tax refund, they received it all year long.”

According to a January article in The New York Times, a Treasury Department analysis provided to the Government Accountability Office estimated that compared with last year, about 4 million fewer filers would receive refunds this year, while about 4 million more filers would have a balance to pay on their taxes because of the new withholding system.

“The good news is the IRS just announced they are waiving the estimated-tax penalty for any taxpayers whose 2018 federal income tax withholding and estimated tax payments fell unexpectedly short of their total tax liability for the year,” Jaeger said. It means that if you paid at least 85% of your tax liability through the year, you won’t have to pay the typical late-payment penalty.

Meanwhile, a team of UBS analysts projected that most married filers with two children would see a pretty sizeable boost …read more

Source:: Business Insider

      

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