Reflecting on the 2019 Tax Season
By Greta G. Meads, CPA
2018 was full of lots of tax changes and resulted in many people feeling very uncertain as to how the new laws would impact their tax liabilities. The IRS has published refund statistics for the 2019 tax season (for 2018 individual tax returns) versus 2018 (for 2017 individual tax returns). These statistics only reflect actual tax returns that have already been filed.
The IRS statistics show that slightly more people received refunds in 2019 vs. 2018. However, the amount of each refund, on average, was about $55 less in 2019 than 2018. Many Americans were unhappy with a reduction in their tax refunds this year, but they must keep in mind that less taxes were withheld from their paychecks all year long. When the new tax law was enacted, the IRS tweaked the withholding tables to adjust to the new rules. This means that in 2018, less tax was taken out of paychecks because tax rates, in general, were lower.
Many Americans were unhappy with receiving smaller refunds because they treat them as a type of “savings” account. This is essentially an interest free loan to the government. If you received a refund on your 2018 tax return, consider reducing your withholding and being disciplined to put the extra take-home funds into an interest-bearing savings account, a 529 plan for your child’s higher education, or into a Roth IRA.
If you need to change the amount of federal tax withheld from your paycheck, simply complete a Form W-4 and return it to the person in charge of payroll at your place of employment. States have their own version of the Form W-4, as well. Consult your tax advisor with any questions you may have.