TAMPA, Fla. — According to the IRS, the average tax refund is down 8.4 percent this year. That means if you got the average refund of $2,035 last year, you will see a check for $1,865 this year.
According to the Tax Policy Center, every tax bracket should have seen an increase in after-tax income. So why are people seeing smaller refunds?
According to Forrest Baumhover, a certified financial planner, it's because people saw that money spread out over the course of the year in their paychecks.
"A lot of it has to do with the tax reform that took place in 2018. And one of the things that the IRS and Treasury Department did was redo the tax tables, the withholding tables, and if people did not make adjustments to it, then the withholding tables were taking less out of their taxes throughout the year, which results in a smaller refund."
As a taxpayer, you pay taxes all year long. Money is taken out of each paycheck and sent to the IRS. Then, when you file your taxes, the IRS calculates the difference. 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.
"So a lot of people probably experienced slightly bigger paychecks over the course of 2018 because less money was taken out of their pay and withheld for taxes, which directly leads to a smaller refund, said Baumhover. "And in some cases, people might owe, hopefully not too much."
So if you were surprised getting your tax return this year, Baumhover suggests using an IRS tool to avoid that from happening next year.
"When it comes to moving forward there are actually a couple of options. The IRS has a tool, its an estimated tax calculator. You can go to the IRS website and actually determine whether or not the withholdings you have on your W4 are correct, or if you need to increase them or decrease them. So you can go to the IRS, they'll help you figure it out."
You can find that calculator here:
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