In December of 2017, Congress — or should we say Republicans, since no Democrats voted for the change — did an overhaul of the nation’s tax system. President Trump joyfully signed the Tax Cuts and Jobs Act of 2017 into law.
At the time some rejoiced with him. Others did not. Now, the early tax filings have contained unexpected negative surprises and not a lot of rejoicing.
A story posted in The Washington Post said — for some — refunds have been less than expected, and less than past years. Many people are even having to pay when they didn’t have to pay in years past. To see the complaints you can go to Twitter’s hashtag site #GOPTaxScam.
If your return isn’t what you have expected, you can also express your own displeasure at that site.
In theory the tax overhaul means most of us will pay less in taxes than in the past. However, refunds — at least in the early returns — have been far less than previous years. The reasons being given have landed in the limits put in place on property and local income tax deductions, and how dollars were withheld from paychecks by the Internal Revenue Service.
The IRS says the average tax refund is down 8% — or $170 on average — compared to 2017. It also said the number of people receiving a refund has dropped by almost 25%.
A spokesman for the IRS said not to read too much into the early data. The returns have been processed through February 1st and were affected by the partial government shutdown. Tax experts agree.
That said, this could end up being the rule and not the exception. The Government Accountability Office (GAO) told people last summer that their refunds were likely to drop for the tax year 2018.
It predicted 4.6 million fewer people will get a refund.
The GAO also said the number of people paying taxes would rise. It says an additional 4.6 million will owe the government money. These people have not paid additional taxes in the past.
Though the number will likely be smaller, the GAO did not issue an estimate of how many people will still receive a refund.
With that, the Tax Policy Center said people shouldn’t confuse these changes with paying more in taxes. Its estimate is that 80% of us will get a tax cut and about 5% will be paying more. Center spokesman Joseph Rosenberg said the cuts are found in more money in those weekly, biweekly, or monthly paychecks.
“There’s a difference between taxes and your refund,” he noted. “People generally got a piece of their tax cut last year gradually in the form of lower withholding on their paychecks.”
A lot of people will disagree with that and polls show many people didn’t find much of an increase — if any — in paycheck totals.
Part of the reason could be the IRS. The agency made major changes in the withholding tables. The idea was to take the correct amount of money out of each paycheck so at the end of the year people would not owe additional taxes nor would they get a refund.
At the time the withholding changes were made the IRS encouraged people to do a thorough review of what is withheld from paychecks. Few did. In the past — it said — 75% of us got a refund. Those refunds are viewed by a lot of us as some sort of a savings account.
The extra $20 to $40 a week in withholding would just get spent.
The one time a year $1,000 to $2,000 refund is usually used to pay off credit cards or other debts. Or it was put into retirement funds or in savings for a downpayment for a home, or for a dozen other reasons.
The Tax Foundation is a conservative think tank. Spokeswoman Nicole Kaeding said not getting a refund isn’t necessarily a bad thing. She noted, “Getting a tax refund means that you gave the government an interest-free loan because you overpaid your taxes.”
But most of us — it seems — prefer to get a refund. That is a real puzzle to Rosenberg and the Tax Policy Center. “It’s a mystery why taxpayers seem to be comfortable — and even happy — with getting refund checks,” he said.
Source link: Washington Post