Av­er­age tax re­fund 8 per­cent less so far

Oth­ers dis­cover they owe money

Northwest Arkansas Democrat-Gazette - - Front Page - HEATHER LONG

Mil­lions of Amer­i­cans fill­ing out their 2018 taxes are get­ting re­funds this year that will be less than they ex­pect, or they are dis­cov­er­ing that they owe money to the In­ter­nal Rev­enue Ser­vice af­ter years of re­ceiv­ing re­funds.

The av­er­age tax re­fund check is down 8 per­cent, or $170, this year ver­sus last year, the IRS re­ported Fri­day. The num­ber of peo­ple re­ceiv­ing a re­fund has dropped by al­most a quar­ter.

An IRS spokesman said not to read much into the early re­port be­cause it only re­flects re­turns pro­cessed through Feb. 1, and the par­tial gov­ern­ment shut­down caused some de­lays in pro­cess­ing fil­ings.

Still, peo­ple have taken to so­cial me­dia to vent their

anger, and many who do are blam­ing Pres­i­dent Don­ald Trump and Repub­li­cans for their shrunken re­fund. Trump and con­gres­sional Repub­li­cans passed a ma­jor over­haul of the tax code in De­cem­ber 2017, the big­gest leg­isla­tive achieve­ment of the pres­i­dent’s first year.

The Gov­ern­ment Ac­count­abil­ity Of­fice warned last sum­mer that the num­ber of tax fil­ers who re­ceive re­funds was likely to drop for the 2018 tax year and the num­ber of fil­ers who owe money would rise.

The agency pointed to an IRS es­ti­mate that about 4.6 mil­lion fewer fil­ers would re­ceive re­funds this tax fil­ing sea­son. An­other 4.6 mil­lion fil­ers were likely to owe money af­ter pre­vi­ously re­ceiv­ing re­funds.

There is no es­ti­mate for how many peo­ple will still re­ceive a re­fund but a smaller one than be­fore. Some re­funds have de­creased be­cause of the changes in the tax code made by the law, such as a new limit on prop­erty and lo­cal in­come tax de­duc­tions.

Some re­funds have de­creased be­cause of how the IRS has al­tered with­hold­ing in pay­checks.

A smaller re­fund, or a no­tice of taxes due, may seem like a sign that taxes went up, but gen­er­ally that’s not true. Ac­cord­ing to the non­par­ti­san Tax Pol­icy Cen­ter, 80 per­cent of fil­ers re­ceived a tax cut, com­pared to about 5 per­cent who are pay­ing more in fed­eral in­come taxes. The tax cuts showed up in fat­ter weekly or bi­weekly pay­checks for most Amer­i­cans.

“There’s a dif­fer­ence be­tween taxes and your re­fund,” said Joseph Rosen­berg, a se­nior re­search as­so­ciate at the Ur­ban-Brook­ings Tax Pol­icy Cen­ter at the Ur­ban In­sti­tute. “Peo­ple gen­er­ally got a piece of their tax cut last year grad­u­ally in the form of lower with­hold­ing on their pay­checks.”

Al­though many fam­i­lies re­ceived a tax cut, their re­fund is smaller this year be­cause the IRS used the new tax law to make changes to the with­hold­ing tables — the amount the fed­eral gov­ern­ment rec­om­mends tak­ing out of pay­checks for fed­eral in­come taxes.

The IRS was try­ing to set with­hold­ing lev­els so that more peo­ple would pay the cor­rect amount of taxes, mean­ing they nei­ther owe any­thing to the IRS at the end of the year nor re­ceive a re­fund.

“Get­ting a tax re­fund means that you gave the gov­ern­ment an in­ter­est-free loan be­cause you over­paid your taxes,” said Ni­cole Kaed­ing, di­rec­tor of Fed­eral Projects at the Tax Foun­da­tion, a right-lean­ing think tank.

In re­cent years, about 75 per­cent of fil­ers re­ceived re­funds, even though per­sonal fi­nance ex­perts say it’s not a wise idea to boost with­hold­ing from pay­checks to get one.

“It’s a mys­tery why tax­pay­ers seem to be com­fort­able — and even happy — with get­ting re­fund checks,” said Rosen­berg.

RE­FUND SHOCK

Many Amer­i­cans pre­fer get­ting a one-time re­fund of $1,000 to $2,000 in­stead of an ad­di­tional $20 to $40 in a weekly pay­check. An­a­lysts be­lieve that those Amer­i­cans con­sider it a way to force them­selves to save to pay off credit card debt, pay down a mort­gage or sup­port a large pur­chase.

Sal Ramirez, 20, earns $45,000 a year as a pack­ag­ing de­signer in San Gabriel Val­ley, Calif. He said he re­ceived a re­fund last year of more than $1,200. He had ex­pected that to in­crease un­der the new tax law, but he only got $900 this year.

“I am re­ally frus­trated with my re­fund this year. I was ex­pect­ing a good chunk of change. I was go­ing to put it toward buy­ing a car,” Ramirez said, ad­ding that he’ll have to save a few more months for the car.

Ramirez, who didn’t vote for Trump, couldn’t re­mem­ber whether his to­tal tax bill went up or down. He was just fo­cused on his re­fund.

John Prugh of Ewing Township, N.J., was irate when he com­pleted his 2018 tax re­turn this month and dis­cov­ered his re­fund would be $3,000 less than what he re­ceived last year.

Prugh, 39, con­sid­ers him­self “solidly mid­dle class.” He is a man­ager at a Barnes & No­ble book­store, and his wife works for the New Jersey state gov­ern­ment. They have two chil­dren.

Prugh’s over­all tax bill is higher and his with­hold­ing looks a lit­tle lower. His fam­ily was af­fected by the new law’s $10,000 cap on state and lo­cal taxes, in­clud­ing prop­erty taxes and state and lo­cal in­come taxes. He said that in the past he nor­mally de­ducted about twice that amount. He was also hit by the elim­i­na­tion of the abil­ity to deduct mileage for work. The higher stan­dard de­duc­tion un­der the new law did not coun­ter­bal­ance los­ing these other de­duc­tions.

But Prugh said he had no rea­son to think the fam­ily’s tax sit­u­a­tion would change this year. He and his wife have lived in the same house for years, have re­ceived about the same pay in their jobs and have two kids.

“It to­tally feels like a scam,” said Prugh, who also didn’t vote for Trump. “I did still get a small re­fund, but com­pared to what I was ex­pect­ing from pre­vi­ous years, it was a shock.”

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