Your tax refund: Claim it or lose it
If you’re used to receiving a big check after filing your taxes each year, you might want to adjust your expectations. That’s especially true if you didn’t adjust your “tax withholding amount” after the Tax Cuts and Jobs Act passed.
The average tax refund so far this year is 8.4 percent less than this time last year, according to the most recent data from the Internal Revenue Service. The average tax refund this year is $1,865, down $170 from last year’s average of $2,035 at this time.
That data set compares the cumulative statistics of Feb. 2, 2018 and Feb. 1, 2019, according to the IRS.
“There are going to be a lot of unhappy people over the next month,” Edward Karl, vice president of taxation for the American Institute of CPAs said, according to Politico. “Taxpayers want a large refund.”
In total, the government has given $8.713 billion in tax refunds this year to 4,672,000 taxpayers, the data show. At this time last year, 6,171,000 taxpayers received $12.560 billion in returns.
It should be noted, though, that the IRS has received 12.4 percent less individual income tax returns than this time last year.
This year is the first time U.S. taxpayers are filing returns under the passed 2017 tax reform that was pushed by President Donald Trump, Bloomberg reported.
Howard Gleckman, senior fellow at the Urban Brookings Tax Policy Center, said that while “some people’s overall tax burdens might be smaller this year” under that tax cut plan, you won’t necessarily be able to tell based on refund checks, according to NBC News.
Rather, people received those tax breaks in their monthly paychecks, the Detroit Free Press reported.
“While some people likely noticed an uptick in their take-home pay, the amount might have been small enough that people didn’t notice, especially those who get direct deposit and might not look at their pay stubs,” NBC News reported. “What’s more, workers who had an increase in their health insurance premiums or other paycheck deductions might have missed the bump entirely.”
The reason for that possible “uptick” in paychecks — but a potentially smaller refund at the end of the tax year — is because of the adjusted tax withholding tables under the Tax Cuts and Jobs Act passed in 2017, the Detroit Free Press reported.
“Tax Withholding” is the income tax withheld from your paycheck by your employer and sent straight to the IRS on your behalf, according to the IRS.
“Avoid a surprise at tax time and check your withholding amount,” the IRS advises. “Too little can lead to a tax bill or penalty. Too much can mean you won’t have use of the money until you receive a tax refund.”
For example, the IRS says, people should check their withholding amounts when the tax law changes, such as it did for this filing season.
In August 2018, the Government Accountability Office announced that about 30 million people (or 21 percent of taxpayers) were not withholding enough for taxes, CNBC reported.
“Just over 2 in 10 taxpayers will owe money to the IRS next year,” the Government Accountability Office reported in 2018, according to CNBC.
The Government Accountability Office expected that “about 5 million people who got a refund last year won’t be getting one this year,” according to Bloomberg.
But don’t confuse your refund — or lack of one this year —with the actual amount you paid the government, Gleckman advised, according to NBC.
“Americans are obsessed with their refunds,” he said, according to the station. “What really matters is whether your taxes went up or down, not whether your refund went down.”
George W. Smith IV, a certified public accountant in Southfield, told the Detroit Free Press something similar.
“It’s a problem if taxpayers don’t understand they received that additional money via larger paychecks during the year,” he said, according to the newspaper. “We tried very hard to educate our clients on this during the year.”