Why You Received a Smaller Tax Return Than You Expected

 Millions of Americans were unpleasantly surprised when they discovered their tax refunds would be smaller than expected or, in some cases, would owe money to the IRS. Many posted their grievances on social media blaming their woes on the new tax code and Donald Trump. Although some Californians did pay more tax in 2018, most did see a reduction in their taxes.
Why Some Californians Paid More Taxes
There were some changes to the tax law that negatively affected some Californians. These included new limits on local income and property tax deductions. Employees who previously benefited from claiming vehicle mileage or certain other work-related expenses were no longer entitled to these deductions. Also, high-income tax payers with kids in college lose the exemption deduction, make too much to claim the education deduction and do not receive the $2,000 child credit. Still, according to the Tax Policy Center, only about 5 percent of taxpayers paid more in federal income taxes.
Why a Smaller Refund?
In most cases, a fatter paycheck is the culprit. Last year, the IRS sent employers new withholding tables, which caused employers to adjust the amount withheld each pay period. Thus, most people took home larger paychecks.
What Should You Do?
• Change your mindset. Receiving a large refund, in essence, means you were giving the government an interest-free loan. Why do that? Thanks to inflation, the longer it takes to receive money owed to you, the lower its purchasing power. You would have been better off taking your extra income from each paycheck and using that money to counter inflation.
• If you had to pay tax, determine whether you need to adjust your withholdings or make higher estimated tax payments. If you are not self-employed, submit a revised Form W-4 to your employer to increase your withholdings.
• Get some tax planning assistance from a tax professional. This may save you thousands of dollars a year in tax obligations. If you are one of our clients, contact us. We offer our clients unlimited free tax planning advice.
Professional Tax Services is a locally-owned provider serving over 3,500 local residents and businesses. For more information call 661-259-1967 or visit www.scvprotaxservices.com. Through their complimentary EZ2 Thrive program, they provide unlimited free tax planning advice to their clients.