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Tax Preparer: Lower Tax Refunds Following Tax Reform Require New "Mindset"

401kcalculator.org/Flickr/Creative Commons

With just weeks to go before the tax filing deadline of April 15, many Americans are  expressing surprise over the size of their tax refunds, with many taxpayers finding their federal returns are lower than they were in previous years. Some people who are used to getting a refund are finding they’ll owe the IRS instead this year.

The changes are directly related to the recent Trump administration tax-reform bill. The IRS reported in early February that tax refunds were down 9 percent from last year. 

Kelly Gibson, a partner with the firm CPADayton in Kettering, says, going forward many taxpayers may have to adjust their expectations about tax refunds.

"We've processed probably 200 tax returns this year and the majority of them are down," said Gibson. "What many clients aren't considering is that their withholding out of their weekly paycheck was also reduced. So, they're seeing more of their dollars in their paycheck rather than in a refund at the end of the year."

The CPA says many taxpayers comparing their federal tax withholdings to their lower refunds will likely find the numbers closely match.

2019 Filing Season Stats IRS
Credit IRS

For many people, that amounts to about $200 or $300, but Gibson says the amounts vary depending on income and other factors, and some CPA Dayton clients have had to pay after receiving small refunds in past years, he says.

"I think very few people actually went back and adjusted their withholding when the tax tables changed [...] what was not publicized largely was the fact that all the personal exemptions were taken away."

Gibson advises taxpayers to consult with their human-resource departments and make any necessary changes to their withholding amounts. He adds that people may need to adjust their perception of what a tax refund is.

"They look forward to it like a bonus and they're just not grasping that it's your own money coming back to you, but I can understand, if you're raising a family and you struggle a little bit, and then all of a sudden at the end of the year you get enough [refund] to take a small vacation or help pay off some bills or whatever," he says. "So, I think it's going to be difficult to change that mindset."

Jerry began volunteering at WYSO in 1991 and hosting Sunday night's Alpha Rhythms in 1992. He joined the YSO staff in 2007 as Morning Edition Host, then All Things Considered. He's hosted Sunday morning's WYSO Weekend since 2008 and produced several radio dramas and specials . In 2009 Jerry received the Best Feature award from Public Radio News Directors Inc., and was named the 2023 winner of the Ohio Associated Press Media Editors Best Anchor/News Host award. His current, heart-felt projects include the occasional series Bulletin Board Diaries, which focuses on local, old-school advertisers and small business owners. He has also returned as the co-host Alpha Rhythms.