Whether you’ll pay taxes or expect a refund, one of the primary questions we’ve been fielding has been the size of those items with respect to taxpayers’ historical record.
Thinking about your taxes now is essential, particularly since many Americans started receiving more money in their paychecks last year because of changes in the payroll withholding tables under the new federal tax law.
Of course, consumers continue to wonder how the new tax rules, passed in December 2017, will impact the tax returns they file next year.
Over the past year, we’ve repeatedly advised taxpayers to take time to re-evaluate their paycheck withholding. Seeing a bigger paycheck now could mean that you’re going to see a small refund — or even a tax bill — on your 2018 return next year. To adjust, you can have more money withheld by tinkering with a W-4.
Currently, all the data we’ve seen suggests that refunds will vary widely – larger and smaller and split roughly half and half. Truth be told, that’s also our estimate on tax bills, too.
Last July, the Government Accountability Office issued a report that noted that the Internal Revenue Service warned taxpayers earlier this year to take a look at the paycheck withholding calculator that the IRS has online.
The IRS said checking your withholding can help protect against having too little tax withheld and facing an unexpected tax bill or penalty at tax time next year.
The average tax refund was $2,825 in 2018, up $9 from 2017, based on IRS data.
About 30 million Americans — or 21 percent of taxpayers — are not withholding enough to cover the taxes dues, according to a simulation listed in the GAO report. That’s up from 18 percent if the tax laws had not changed.
About 73 percent of taxpayers with wages are having too much taxes withheld and would receive a refund, based on simulations run by the Treasury Department. That’s down from 76 percent if the tax laws had not changed.
Some taxpayers may be especially vulnerable to having too little withheld, given the changes in tax breaks and rules. They include: Two-income families. Families with older dependents, including children 17 or older. Taxpayers who itemized deductions in 2017 — including some with vacation homes.
Households with high incomes, homeowners who live in high-property tax states and those with complex tax returns are urged to take a second look at their withholding amounts, too.
Some consumers might be willing to take the money now and settle for a smaller refund or a tax bill next year. But others might depend on a bigger refund. As you’ve undoubtedly been asked, “Do you want it in your paycheck? Or do you want it in your refund?” That’s the real question, and it hasn’t really changed.
If you or your clients have any tax issues or problems with the IRS/State or other federal tax problems, please feel free to contact me directly at (909) 570-1103 or by email at Carlos@HealthcareTaxadvisor.com
Carlos Samaniego, EA
Licensed by The Department of Treasury to represent taxpayers
1255 W Colton Ave, #535
Redlands, CA 92374