If you are use to getting large tax refunds, you might not be getting one this year and here is why…. and it’s not a tax scam.
Its tax time and I wanted to take some time to explain an issue that some face this tax season. This is so important that even a hashtag was created to help, #GOPTaxScam. Last year the Tax Cuts and Jobs Act went into effect and changed our current tax code. Personal income tax rates dropped; Child Tax credit doubled; standard deductions were increased; and exemptions went away. All of this sounds like a big refund right? But you aren’t getting one. Why?
This is why.
The tax withholding tables were slashed which means that you owe less taxes throughout the year. Because of the fact that you owe less taxes, you probably noticed that your income on your paycheck increased. All of that money that in the past was sent to the IRS was given back to you throughout the year in your paycheck. So therefore, for many, your refund may be lower than in the past. Again, the main reason your refund will be lower is because instead of having to wait till April 15th to receive it, the IRS let you keep more of your money throughout the year.
Let’s not forget, a refund is nothing more than getting your money back. That’s money that you sent to the IRS that you overpaid. It exceeded the amount you owed so they sent it back. With no interest!
Last year we provided a comparison to all our tax clients that showed their taxes for 2017 vs. 2018. For most them, their tax liability went down. Some more than others. There were a few who were not impacted at all by the changes and those were tax payers that always have had a ZERO tax liability or those that already were in an extremely low tax bracket.
That doesn’t mean you got robbed as many in Social Media are claiming that “Donald Trump stole their money” – it Simply means you got to keep more of our money in the first place.
If you are one of those tax payers that loves to receive a large refund, there is nothing keeping you from this. You can accomplish this by redoing your W-4 so that the IRS can take out more money from your paycheck. This will allow them to keep YOUR money and use it for 12 months without paying you interest. I hope you don’t believe this is a smart way to pay your taxes.