Millions of Americans filling out their 2018 taxes are now finding that their refunds will be less than expected or that they owe money to the Internal Revenue Service (IRS) instead of receiving an expected refund. Others are learning that they owe far more this year than they did in previous years. The Government Accountability Office issued a warning about this last summer, but Americans are just now beginning to see how they are personally affected.
According to data from the IRS, the average tax refund check is down 8 percent ($170) this year, falling from $2,035 for tax year 2017 to $1,865 this year. The number of people receiving a refund so far has fallen by nearly 25 percent. The IRS estimates that about 4.6 million fewer filers would receive refunds this year and roughly the same number of people would owe money who hadn’t before.
This tax season happens to be the first counting a full year of the overhauled tax code in the calculations. The major overhaul to the tax code in December 2017, which was enacted with only Republican votes, made many changes that affected both business and personal income taxes. Experts said at the time that people could see smaller refunds than expected if they didn’t adjust their paycheck withholdings after the changes took effect.
Some of the biggest changes to the tax laws involved nearly doubling the standard deductions and eliminating or limiting other deductions. The IRS also altered withholding in paychecks so that more people would pay the correct amount of taxes, meaning they would neither owe money nor receive a refund for the year. The IRS recommended that people review their withholding level after the changes were enacted, but it appears that few people did.
A spokesman for the IRS warned against reading too much into the early data. The data used for this latest estimate only reflects returns processed through Feb. 1. As more filings are process that number could change considerable. Only then will we get a full picture of how the tax overhaul is affecting the average American.