People are starting to do their taxes ahead of the April deadline. But many are finding a surprise or shock because of some serious changes to the tax laws.
This is the first tax season under the new federal tax law. And it’s proving to be surprising and confusing for some people, especially those who are used to getting a tax refund.
“What happened is that they had less withholding during the year and that’s what contributed to the smaller refund,” said certified public accountant Bassim Michael.
Michael says many people were not aware of how the new tax rules were changing their paychecks. Those paychecks were bigger because fewer taxes were taken out.
“Many many taxpayers are actually paying less taxes they just aren’t getting a bigger refund because they paid less withholding during the year,” stated Michael.
According to the IRS the average tax refund amount is down nearly 9% from the same time last year and the number of refunds is down 16%.
Michael says people are paying more because some deductions and exemptions were also cut or capped.
“Another change I think a lot of people were not ready for is that people that were able to deduct unreimbursed employee expenses is they can’t deduct those any more”.
That can hurt people in a high tax state like California because all we pay in property and state taxes may not be deductible any more.
If you haven’t adjusted your with-holding on your paycheck, fill out a new W4 with your employer so you don’t have a surprise next year.