According to the IRS, the average tax refund is down over 8% compared to last year.
As we begin to file our Federal and State income taxes, many of us are scratching our heads over lower-than-expected tax refunds. Many of us are getting a BIG surprise:
We owe money to the Internal Revenue Service.
How do tax refunds work?
Each year, you probably file your taxes in the weeks leading up to April 15.
But, you’re actually paying taxes all year long. Your employer subtracts money from each of your paychecks and sends it to the IRS. You know, the withholding form you sign each year? That’s where the tax shocker
Then, when you go to file your taxes, you compare what you owe to what you’ve already paid. Bottom Line…
If you owe more than you paid, you have to send Uncle Sam a check.
If you paid more than you owe, the government gives you a refund.
In recent years, most of us — roughly 75% — of Americans have typically gotten a refund.
Here’s the deal: When the tax cuts took effect, the IRS also changed the withholding tables.
That means the amount of money withheld (for tax purposes) in your paycheck was altered to more closely reflect your modestly-lowered tax burden under the newest tax law. https://www.wfmynews2.com/article/news/local/2-wants-to-know/millions-of-americans-will-probably-be-surprised-by-their-tax-refunds-or-bills/
Keith Hiatt, Breslow, Starling, Frost, Warner, Boger and Hiatt
Certified Public Accountants 3825 W. Market Street, Suite 200, Greensboro, NC 27407 336-292-6872
Helpful Links: http://www.breslowstarling.com/helpful-web-links.php
Here’s what you should know regarding the upcoming tax filing season…
Big changes this year
*Bigger standard deduction: The standard deduction will nearly double for every filer from 2017: $12,000 for single and married taxpayers filing separately, up from $6,350; $18,000 for heads of households, up from $9,350; and $24,000 for married couples filing jointly, up from $12,700.
*Another substantial change is the doubling of the child tax credit to $2,000 per child from $1,000. Taxpayers also can claim a new $500 credit for adult dependents.
3 ways to get ready
*Gather documents: Print out a tax checklist and gather the documents as you receive them, such as W-2s from your employer and 1099s from your bank. Collect any receipts you plan to use to claim deductions for charitable contributions.
*Pull out old returns: Take out a copy of last year’s tax return to help jog your memory on what credits you claimed and deductions you made. This will help you note key changes in your life that may affect your taxes, such as marriage, divorce, a new house, a new baby or retirement.
*Anticipate changes: Use online calculators to help you anticipate your tax situation post-tax reform law. If you estimate you may owe Uncle Sam, you can still fund your IRA – until April 15 – to lower your 2018 taxable income.
NOTE: The tax deadline for filing will return to the traditional April 15.
Here are other important tax dates:
January 15, 2019: If you’re self-employed, fourth-quarter 2018 estimated tax payments are due.
January 31: Deadline for employers to mail out W-2 forms and businesses to send 1099 statements, which report non-employee compensation, bank interest, dividends and distributions from a retirement plan, and help calculate your total taxable income.
March 15: Heads up incorporated workers! Tax returns for LLCs and S-corps are due.
April 15: This is the last day you can file your taxes electronically or postmark your paper taxes.
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