COLORADO SPRINGS – Some tax filers are experiencing an unpleasant surprise in the form of smaller-than-expected refunds or even having to unexpectedly owe the government money on their 2018 tax returns.
Tax reform that took effect in 2018 reduced the amount of money taken out per paycheck for most people, the net result being more money earned throughout the year, thereby increasing taxable income. However, it’s likely that many people did not notice the increased income due to it being spread out over the course of the year, and the fact that some people, especially those who utilize direct deposit, don’t monitor paycheck amounts closely enough to notice small fluctuations.
In some cases, the additional income may have moved taxpayers into different income brackets, altering the percentage of tax owed. For people who didn’t adjust their tax withholdings to compensate for the change, the result may be a reduced refund, taxes owed when a refund was expected, or more taxes owed than expected.
Additionally, most itemized deductions were eliminated in favor of a doubling of the standard deduction. “Instead of getting higher deductions, now their taxable income is higher and their tax liability is higher,” said Katrina Longan, franchisee of the Liberty Tax location near Austin Bluffs and North Academy in Colorado Springs. “They’re left wondering, ‘Well, I have all this extra paperwork, I’ve been told for years to keep track of unreimbursed employee expenses and charity contributions and property tax,’ and really, unless they have significant medical bills, we haven’t seen anybody that has to itemize.”
To avoid a similar circumstance on 2019’s returns, Longan recommends adjusting withholdings now. “It’s still early in the year. We’re only in February, so changes that you make now will better prepare you for the years to come,” Longan said.