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Some Americans are surprised by smaller tax refunds
As federal tax returns start rolling in across the country, many Americans are surprised, and even angered by smaller returns. Others are finding that they owe money when they’ve typically always had a return. Varying emotions rise when individuals depend on a large return for trips, purchases or spending.
The 2018 tax returns were the first to be affected by the 2017 tax code overhaul. Generally, the government adjusted the tax tables in anticipation that most people would be seeing a reduction in taxes, so the IRS adjusted the tables so less tax would be taken out.
Smaller refunds are happening for a few different reasons. Reduced withholding has caused most Americans’ paycheck to grow slightly. Overall, they are likely to come out ahead.
“Don’t judge your taxes by your refund. That’s only one part of the conversation,” said Nicole Kaeding, director of federal projects at the Tax Foundation think tank. She added, “Ideally, you don’t actually want to receive a large refund. Because what you’ve done is given the federal government an interest-free loan. Instead, what would be better is to adjust your withholdings so you get more take-home pay in every paycheck.”
If you want to know more about why your tax refund is so different from last year, it’s best to talk to the professionals. If you use a tax filing software, it can’t explain that to you.
You may want to increase your withholding going forward. Your employer’s HR or accounting department should be able to help you. Also, if you set up a sound strategy for your financial planning for the entire year, you won’t be surprised when tax time comes in 2020.
Speak with your Morgan & Associates CPA today to help set up a strategy customized for your financial situation.
