As filing deadline looms, many taxpayers seeing smaller refunds
Death, taxes — and fines for failing to file your taxes on time. Those are three things you can count on.
In Connecticut, taxpayers have less than two weeks to file their federal and state income tax returns for the 2018 tax year. For the self-employed, retirees, investors and others who pay their taxes quarterly, April 15 also is the due date for the first estimated tax payment of 2019.
Of course, if you’re among the many whose employer withholds taxes from your paycheck, you might be entitled to a refund. And, as many early filers have learned, refunds this year might not be as big as they’ve been in the past.
But that doesn’t necessarily mean you’re paying more taxes.
It might just be that you had less withheld from your paycheck during the year, a consequence of the Tax Cuts and Jobs Act that Congress approved in December 2017. The law, which took effect Jan. 1, 2018, changed tax rates and brackets, revised business expense deductions, increased the standard deduction, suspended personal exemptions, increased the child tax credit and limited or discontinued other deductions. As a result, most Americans are paying less taxes than before.
“We’re finding that a lot of single-filers without dependents have done worse this year (in the size of their refunds),” said Kim Barry, the Thames Valley Council for Community Action’s financial education coordinator. “It’s because in January (2018) they started having less taken out of their pay. Less withholding means a smaller refund.”
Some people who’d gotten used to receiving a refund of a certain amount every year were caught off guard.
Nationally, the Internal Revenue Service reported in early February that the average 2019 refund was down nearly 9 percent over last year. By mid-February, the average 2019 refund was down 17 percent. But cumulative data for the week ending March 22, the most recent available, show the average 2019 refund of 55,000, said the program’s clients have been qualifying for an average refund of about 2,000.
Taxpayers have been affected by changes in the federal tax law’s approach to standard deductions as well as what can be claimed as itemized deductions. Those who itemize, for example, can now only deduct up to 695. In the 2019 tax year, the penalty no longer applies.
On the state level, Connecticut taxpayers who are 65 or older or who have claimed at least one dependent on their federal income tax return can again qualify for a maximum $200 credit for local property taxes. The 65-or-older provision is scheduled to be phased out next year.
The IRS advises employees to annually review the amount their employer is withholding from their paycheck. A change in the number of allowances claimed on Form W-4 may be in order.
“You might prefer to have less tax withheld up front and receive more in your paycheck, which may mean a lower refund or an unexpected tax bill,” the agency says in one of its publications. “Or, you might prefer to make estimated or additional tax payments to avoid an unexpected tax bill and possibly a penalty.”
To perform an online “Paycheck Checkup,” visit IRS.gov.
People who owe taxes should file their returns by April 15 even if they can’t pay in full, the IRS says. They should pay what they can and consider a payment plan for the rest.