Tax Refunds Down $4.4B For Tax Season, Says IRS
The Internal Revenue Service reported a $4.4 billion decline in total tax refunds as of April 19, the first tax season under the Tax Cuts and Jobs Act, with the average size of tax refunds down about 2 percent.
The total number of tax refunds increased slightly, from 95,434,000 to 95,737,000, a 0.3 percent increase. The total amount of tax refunds declined 1.7 percent, though, from $265.326 billion to $260.919 billion. The average amount of the refund also dipped 2.0 percent, from $2,780 to $2,725.
The 2017 tax overhaul eliminated or sharply limited a host of tax deductions, including widely used ones like the state and local tax deduction. Taxpayers can write off only $10,000 in state and local taxes from their federal taxes now. That provision has been attacked by lawmakers in so-called “blue states” that traditionally vote for Democrats. In exchange, the tax law doubled the size of the standard deduction and lowered tax rates overall, prompting more taxpayers to skip itemizing this year.
At the same time, the Tax Cuts and Jobs Act also eliminated the personal and dependent exemptions. The IRS recommended last year that taxpayers adjust their withholdings with a “paycheck checkup” using its online withholding calculator to avoid withholding too little this year. Nevertheless, relatively few taxpayers actually adjusted their withholding, and the online calculator was difficult to use for the average taxpayer.
The vast majority of taxpayers saw their taxes reduced over the course of last year, but many of them didn't notice the difference in their paychecks. The IRS faced complaints from many taxpayers who ended up owing far more money than they expected or getting a lower tax refund than anticipated. In response, the IRS lowered the threshold for imposing tax penalties on taxpayers who under withheld or paid too little in estimated taxes last year. The IRS is again urging taxpayers to check their withholdings now that tax season is over. However, the IRS is also planning to roll out a newly revised Form W-4 next month that will again require many taxpayers to adjust their withholdings. They will likely need to get help from tax professionals because it is expected to be even more complicated to use than last year’s form. An early draft of the form provoked complaints last year from accounting and tax professional groups because it asked for much more information than usual about outside sources of income from spouses and others.
Provided By: Accounting Today