Taxed out: Here’s why your refund may be smaller or nonexistent in 2019

16 Feb Taxed out: Here’s why your refund may be smaller or nonexistent in 2019

Most Americans have a smaller total federal income tax bill for 2018 than they did in previous years, thanks to the tax law passed by Congress in 2017. But thanks to changing instructions from the IRS on how to withhold tax, many people will see smaller refunds or may even owe money when they file their tax returns.

So far, the average refund paid to taxpayers is down 8.7% to $1,949, from an average of $2,135 this time in filing season last year, according to the IRS.

Trump administration officials have argued that smaller refunds are often a good thing, since they mean taxpayers have paid less money unnecessarily over the course of the year. But many taxpayers have come to rely on their refunds as essentially a way to save money. As a result, they are surprised to discover this year that they’re not getting back the amount they’ve been accustomed to—or worse, that they owe Uncle Sam a check.

The Treasury Department has estimated that about 73% of workers have more tax than necessary withheld from their paychecks this year, meaning a refund is due, compared to 76% that would have gotten a refund under previous rules, NPR reports.

Some taxpayers actually do owe more under the new tax law, which capped deductions for state and local taxes, especially affecting homeowners in high-property tax coastal states, and eliminated some deductions, such as those for unreimbursed expenses incurred as an employee.

The IRS has been keeping track of tax filing statistics on its website to see how they compare to years past. However, it’s still early in the season, and the data will likely present a far more accurate picture of the tax law’s effects as the weeks go on. You can follow the stats here.

Source: Fast Company