- Tax Day 2019, the last day to file your 2018 tax return, is Monday, April 15.
- According to IRS data for the second week of this year’s filing season, the average federal tax refund amount was down 8.7% from last year, to $US1,949.
- Smaller refunds are drawing the ire of many Americans, including prominent Democrats who are blaming the tax law President Donald Trump enacted in 2017.
- While many Americans who use tax refunds as a savings vehicle are disappointed, a refund is not indicative of a person’s tax bill but of the amount withheld from their paycheck.
- Middle-class Americans, on average, saw their taxes go down for the 2018 tax year.
Many Americans are especially frustrated this tax season, the first under President Donald Trump’s new tax law.
According to IRS data for the second week of this year’s filing season, the average federal tax refund amount was down 8.7%, to $US1,949, compared with the same window last year. The total number of refunds issued dropped by more than 15%.
Taxpayers who e-file and request direct deposit should see their refund hit their bank account within 21 days of submitting their return. Many have said they aren’t happy with the size of their refund this year, and some even owe money to the IRS.
Tax refund a thousand dollars lower pic.twitter.com/nBsGGvnbkl
— STEPHEN ZERANCE (@stephnz) February 16, 2019
A lot of the anger about smaller tax refunds has been directed at Trump and the GOP:
Hey @realDonaldTrump my wife and I usually receive a nice tax refund every year. I have over $2,200 in student loan interest and $5,200 into our mortgage. Now we owe $375. Please RT if you have a similar story. #FakePresident #TaxScamStories
— John G. (@RealG3ss) February 15, 2019
We count on our tax refund ($2500-3000) to help us catch up on back bills and to take a family camping trip (where we splurge on a cheap cabin). This year, we OWE about $200. WTF??? This ain't what I voted for #GOPTaxSCAMStories #MAGA
— Samson (@CrossSamson) February 17, 2019
While many Americans rely on the windfall from a tax refund, financial experts say a larger or smaller refund is not indicative of whether a person paid more or less in taxes but of the amount withheld from their paycheck.
“Some individuals like receiving a larger refund because they use it as a savings account,” Mark Jaeger, the director of tax development at TaxAct, told Business Insider. “It’s a way for them to save a significant chunk of money throughout the year. For some, that’s a perfectly fine strategy, as long as you can cover all of your other expenses throughout the year.”
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Big tax refunds generally mean you paid too much in taxes – you had too much income tax taken out of each paycheck, and now the IRS is returning what is rightfully yours. Instead of keeping your money in a savings or retirement account where it could earn interest all year, you essentially gave an interest-free loan to the government, Business Insider previously reported.
Further, receiving a smaller refund or owing money to the IRS doesn’t necessarily mean you had a higher tax bill than before the new tax law, Business Insider’s Bob Bryan explained. Middle-class Americans, on average, saw their taxes go down for the 2018 tax year.
The tax law instituted new guidelines for how much employers should withhold from employees’ paychecks for taxes, resulting in an increase in take-home pay for about 90% of Americans beginning in February 2018.
Employees who didn’t adjust their withholdings after the new guidelines were released could be receiving a smaller refund than they expected this year, Jaeger said.
“Just because you receive a small refund doesn’t mean you didn’t get everything back you were owed or that you’re worse off financially – it most likely means you paid the right amount of federal taxes you owed during the year and didn’t overpay,” Jaeger said.
According to a January article in The New York Times, a Treasury Department analysis provided to the Government Accountability Office estimated that compared with last year, about 4 million fewer filers would receive refunds this year, while about 4 million more filers would have a balance to pay on their taxes because of the new withholding system.
- Read more of our Tax Day 2019 coverage:
- Tax Day is April 15. Here’s what you can expect when filing under the new tax law.
- How to figure out if you should do your own taxes or hire a pro
- It took me under an hour to file my taxes this year thanks to a time-saving strategy that’s available to anyone
- I’m filing my taxes with TurboTax and will probably get one of my smallest refunds ever, and I’m happy about it
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