The news published 02/18/2019
Now when the tax season is here, many Americans are complaining that the 2018 tax reform on its promises of reducing taxes. According to the IRS, the average tax refund this year is so far $1,865, which is down from the typical $2,035 tax refund Americans got this time last tax season.
Taxpayers blame refund shrinkage on the federal government, but in it’s not the case this time. Many taxpayers haven’t realized their role in determining the size of their refunds, but all they have to do it to look at thier withholding.
The amount of money that gets withheld from your paychecks over the course of the year determines how big your tax refund will be. Have less taken out, and your refund will shrink, or you could even owe taxes at the end of the year.
Not only changes in withholding tables caused withholding amounts to change because it’s always in your power to file Form W-4 with your employer. When changes of any nature occur, failing to file a new W-4 runs the risk of unexpected change to the amount of your refund.
The Employee’s Withholding Allowance Certificate, or simply Form W-4, provides essential information to your employer and the IRS. By allowing you to select how many withholding allowances to claim as well as the appropriate filing status for your return, Form W-4 tells your employer how to use the IRS withholding tables to figure out how much money to take out of each paycheck to go toward your federal tax bill.
If you don’t update your withholding allowances, the incorrect amount will get withheld going forward hurting you from a tax perspective. If you run any kind of changes such as the limitation of state and local tax deductions, the elimination of miscellaneous itemized deductions, and changes in the size and eligibility for other tax breaks though Form W-4, it will suggest reducing your withholding allowances and allowing the IRS to boost the amount withheld from your paychecks.
When tax law undergoes such massive changes as the 2018 tax reform, you should file a new Form W-4 with your employer and make sure it accurately reflects your tax picture for the future.