NEW YORK (Reuters) – While this year’s taxapalooza is off to a slow start because of the earlier U.S. government shutdown, one thing already is clear: your refund might be a whole lot smaller than you were expecting.
The Internal Revenue Service (IRS) released its first set of filing season statistics last week. The average refund was down 8.4 percent from the equivalent period last year, at $1,865 from $2,035.
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The lower refund amount is tied up in changes from the Tax Cuts and Jobs Act that went into effect in 2018. To match the new law, the government last year changed the amount of tax withholding it takes out of paychecks.
Yet many people did not notice and adjust their withholding. So when it comes to tax time, filers may be getting back less – even if their overall tax burden was lower than the previous year.
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Not everyone should expect smaller refunds. Some may get worse news, and actually end up owing, particularly single taxpayers in states with high local taxes.
Tynisa Gaines, an enrolled agent tax preparer based in Henrico, Virginia, has a single client who is going to owe more this year in taxes, even though he is now in a lower tax bracket. This is because he can no longer deduct as much of his state and local taxes, which results in a difference of about $5,000 more in taxable income for 2018.
“He’s going to be mad,” Gaines said. “I haven’t told him yet.”
One big change that will make refunds look different is the tax form itself. Filers used to skipping straight to line 76 to make sure their refund is correct can now find that information on line 19.
Look - Form - Changes - Redesign
The new cosmetic look of the 1040 form belies all the changes within. The redesign squishes what used to be 79...
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