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