Expecting a Big Tax Refund? Don't Be So Sure [View all]
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Most households got tax cuts under the law. But tax cuts and tax refunds aren’t the same thing. The tax cut is the change in what people owed for 2018 compared with what they would have owed if Congress had done nothing. The refund is what happens when the IRS sends back any extra money people paid during 2018 or delivers any refundable tax credits.
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About two-thirds of households are getting tax cuts, paying less in 2018 individual income taxes than they would have under the old system. Many, but not all, will get larger refunds than they typically do. Many households already have received the bulk of their tax cuts. That is because the IRS changed the default rules for calculating how much is withheld from paychecks for taxes. Those changes took effect in February, though some taxpayers manually adjusted their withholding with their 2019 refunds in mind.
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Starting in tax year 2018, Congress replaced the personal exemption—a per-person deduction of more than $4,000—with larger standard deductions and increased child tax credits. The law also lowered tax rates for individuals and closely held businesses. Congress eliminated or curbed some tax breaks, such as the deductions for moving expenses, unreimbursed employee costs and state and local taxes... At the same time, the IRS says it expects more people than usual to owe taxes and penalties, including from people who usually get refunds. Those most at risk of underwithholding are people who used to itemize deductions but now don’t, households with two wage earners and people with complex situations, according to the IRS.
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The government urged taxpayers to adjust their withholding to get close to the refund they want or make sure they were paying enough over the year. But it isn’t clear how many people did that.
“People don’t understand this,” said Kathy Pickering, executive director of the Tax Institute at H&R Block Inc., which prepared 20 million U.S. tax returns last year. “People generally think they’re going to get the same refund as they did in the prior year.”
https://www.wsj.com/articles/expecting-a-big-tax-refund-dont-be-so-sure-11548594000 (paid subscription)
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Our taxes are about $250 higher than under the old system but, hey, Trump and DeVos and Ross get to keep their millions.
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