The New Year brings 2018’s tax refunds, but what most Americans are concerned about is the decrease in tax returns this year that have dropped as much as 8 to 10 percent. The contesting results of both the government shutdown, new tax laws and people sending in refunds later in the year has caused a stir in what you will receive back. Some are even quoting it as the perfect tax storm.
The Internal Revenue Service (IRS) data has reported this decrease, showing the average tax refund in the first two weeks of filing season this year as $1,865, compared to last year’s average of $2,035. This report also shows the decrease of tax returns and the number of those processed are down compared to last year, presenting at this point in 2018 an average of about 18.3 million returns and 17.93 million processed. In comparison to this year – the IRS has received 16.03 million and only processed 13.3 million so far – it is a far cry from what many tax consultants and payers were expecting.
In line with the Tax Cuts and Jobs Act, the Treasury and IRS adjusted the tax withholding tables through individual tax rates, increased standard deductions and the elimination of some popular deductions. If you face high state and local taxes (SALT), many tax professionals expect you to be hit hard with these changes. Many weren’t expecting these modifications due to the fact these rules were altered in the last year and may have not impacted your 2017 tax returns but is now in effect with your 2018 tax returns.
Josh McLain, a certified public accountant (CPA) here at Corporate Capital, shares the following:
“National headlines are telling you refunds are down 8 to 10 percent, so automatically, you are going to think you are paying more in taxes due to the new tax law. In some cases, that may be true. However, in a lot of cases, the decrease in refunds is simply due to the fact that not as much federal taxes were withheld from your paycheck in 2018.
Many of you probably noticed an increase in your paycheck once the new tax law went into effect in early 2018. This reduction in tax withholdings and increase in your paycheck was in anticipation of the decrease in tax.
For example, a taxpayer begins to receive an additional $200.00 bimonthly on their paycheck due to the decrease in federal withholdings. This taxpayer will receive an additional $4,800.00 in their pocket during the year…meaning they paid the IRS $4,800.00 less throughout the year. The fact that this taxpayer received this extra money during the year is going to mean their tax refund is going to appear $4,800.00 smaller or tax due is $4,800.00 greater.
Taxpayers should be focusing on their total tax number rather than what their tax refund or tax bill is. I encourage anyone who is uncertain or needs help calculating their estimated tax to give Corporate Capital a call and help eliminate the unknown.”
At Corporate Capital, we are invested in making sure you get the most out of your tax returns and helping you understand how these changes in tax laws affect what you will be getting back or paying. By hiring a CPA, you will gain the benefits of having individual accounting services provided to yourself as an individual or if you own a business.
If you are confused or experiencing anxiety with this year’s tax changes, let Corporate Capital take your worries and turn them into relief with a better understanding and knowledge of your tax-saving opportunities. Not only will we help put your 2018’s refunds in order, but we’ll also help you prepare for the next year as well. Give our office a call at 855-371-0070 to learn more about how you can get the most out of your tax refunds this year.