Is your tax refund lower this year?
You are not alone. As of February 1, the IRS had issued 4.67 million refunds this year, up from 6.17 million at the same time last year. The average reimbursement was $ 1,865 compared to $ 2,035.
But tax experts say most people still pay less taxes than last year.
How is it possible?
The Republican / MassLive.com spoke with two chartered accountants, John Kilcoyne, a partner at Solar & Kilcoyne in Leominster, and Andrew Schwartz, founder of Schwartz & Schwartz at Woburn – to understand what was going on.
"All other things being equal, the rates were a bit lower, the taxes went down a bit, but unfortunately the repayments went down," said Kilcoyne.
The change took place in the overhaul of the federal tax passed by Congress in December 2017.
The bill has reduced the tax rate for most taxpayers. For example, the IRS has written new tax withholding tables that provide employers with information on the amount of deductions that must be made on workers' paychecks.
For most people, the amount of their withholding decreased, so they received more net pay each time they received a paycheck.
A refund is made when someone pays the government more money during the year than what he actually owes taxes. The government is returning the extra money. In this case, the amounts retained by employers based on the new tables tended to be closer to the amounts actually owed. At the end of the year, the government did not have to repay so much. In some cases, the taxpayer might have had a little more.
"They reduced the holdback a bit more than they should have been, a posteriori," Schwartz said.
Schwartz said that the most important number to look at was not the amount of their repayment, but their total tax debt for the year – which in most cases declined.
Mr. Kilcoyne said that most accounting firms were trying to warn their clients if there was a significant change in federal tax legislation, and it was making headlines.
"It was not a total surprise nor a total shock unless you have your head in the ground for 12 months," Kilcoyne said.
But Kilcoyne pointed out that people often do not question the slight increase in their net pay and that many taxpayers did not know what it would mean in February, March or April, when they will receive their reimbursement.
As with any tax change, each person's personal situation is different. Some taxpayers could see their total tax payments increase, depending on the changes made by Congress to the deductions. Others may not see any difference.