February 20, 2019
Income Tax Refund 2019
Many Americans across the country are finding that they aren’t receiving the refund amount they had in previous years, and in some cases, even owe the IRS. What does this mean for you and what should you expect going forward? Read on to learn more about the recent tax refund changes.
What has caused the major tax refund changes for many taxpayers?
After months of debate and several revisions, President Trump signed into law the “Tax Cuts and Jobs Act” on December 22, 2017, that everyone’s heard about. The changes made to the tax code are the most significant since 1986. The extent of the impact on individuals and families will depend upon factors such as your income level, deductions, and filing status. President Trump said in October 2017 that the “typical” household would save $4,000 under the new tax code. However, it is not good news for everyone.
Of the Americans who have already filed their tax returns, many are feeling the negative impact of the new tax changes. Some are surprised at the difference in their refund amount compared to last year’s refund, and some are finding that they now owe thousands to the IRS for the first time.
What are the effects of the new tax changes?
This year the average refund amount among early filers was down by nearly 9 percent according to the IRS. Many Americans are left wondering what caused such change?
In many cases, the changes are due to the loss of certain deductions taxpayers used to be able itemize, such as employee business expenses or the limits placed on mortgage and state tax deductions. For some, it’s due to no longer being able to claim personal and dependent exemptions as in past years. For a family of four, their personal exemption lowered their adjusted gross income by $16,200. For others, it is because they had less withheld from their paychecks and took home more money each pay period.
The Department of Treasury has made a statement regarding the reports of smaller refunds, noting that it was still early in the filing season. They stated that “Refunds are consistent with 2017 levels and down slightly from 2018 based on a small initial sample from only a few days of data”.
Who can expect a larger refund?
Despite many of the negative effects these refund tax changes may have brought, there is a bit of good news for some. A lower refund does not necessarily mean you’ve paid more in total taxes. It could just mean you paid in less tax with every paycheck. Those who make estimated quarterly payments will likely see a higher refund since they base their tax payments off of last year’s tax amount. Taxpayers who do not itemize their deductions will also likely benefit from the nearly doubled standard deduction amounts.
What to expect going forward
The new tax laws are currently in effect and slated to remain in place at least through 2025. The tax overhaul is also expected to raise the federal deficit by hundreds of billions of dollars, and potentially up to $2 trillion over the next decade.
The new tax rules cut corporate tax rates permanently and individual rates temporarily. Those that are expected to benefit the most from the new tax laws are the highest earners; while the lowest earners are expected to pay more in taxes in the coming years.