Changes to the U.S. tax code drastically cut refunds to taxpayers this year, and another change next year may do the same. File Photo by D. Pimborough/Shutterstock
April 15 (UPI) -- Some Americans are getting a sobering surprise as they finish their 2018 taxes on today's deadline -- instead of getting an expected refund, they owe money.
A NerdWallet survey found 20 percent of Americans who'd filed their 2018 federal tax return earlier ended up owing money. Of those taxpayers, 32 percent received a refund last year. That amounts to 7.9 million new Americans owing money this year, the survey said.
"The new tax rules will affect people's final tax bill, whether they owe or get a refund, so they have changed everyone's tax situation," NerdWallett tax specialist Andrea Coombes told the New York Daily News. "That means you should go in and make sure your withholding is appropriate."
President Donald Trumpchanged the tax brackets and doubled the standard deduction when he signed the Tax Cuts and Jobs Act into law in December 2017. Americans who earn $150,000 or less and have dependents benefited the most, with $2,000 in child tax credits.
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The standard deduction -- $12,000 for individuals and $24,000 for married couples filing this year -- will continue to increase every year through 2025. Filing next year, it rises by $200 for individuals and $400 for couples. By contrast, the standard deduction for single filers last year was just $6,350.
But the new tax code eliminated personal exemptions and slashed the mortgage tax deduction. And experts say too many people didn't change their withholding -- the amount of tax deducted from each paycheck -- to compensate for the changes. The NerdWallet survey found just 17 percent of taxpayers did so after the new law went into effect.
"They didn't heed the warnings from the IRS about checking their withholding," said Cindy Hockenberry, director of tax research and government relations.
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More changes might be in store next year. The Internal Revenue Service is planning a revised W-4 form that aims to get workers' withholding amount closer to what they truly owe at tax time -- hence, smaller or no refunds, but also reduced amounts owed.
Filling out the revised W-4 might be far more complicated.
"It'll be a much bigger pain," Pete Isberg, head of government affairs at payroll company ADP, told USA Today. "The accuracy will be 100 percent but the ease of use will be zero."
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The IRS hasn't issued the new W-4 yet, but sent a draft version to experts last year for feedback.
"It looked a lot more like the 1040 than a W-4," Isberg said.
Filling out a more complex W-4, though, should make it easier to file your tax return every year.
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The IRS wanted to implement the new form for 2019, but might delay until 2020.