Early returns from people filing their taxes under the revamped federal tax code haven’t all been happy.
While some may be pleasantly surprised after navigating the changes brought about by a tax overhaul passed in December 2017, others are wondering where their usual refund went or, in some cases, how they’re going to come up with an unexpected payment due to the Internal Revenue Service by mid-April.
“There’s still a lot of confusion surrounding it,” said John Daigneault, a partner at Leone, McDonnell and Roberts in Wolfeboro.
Daigneault said Monday that it’s too early in the filing season to classify anything as a trend, but he has seen and heard some concerns from clients who are filing early as they tackle the new tax code and its many changes.
While most of his firm’s clients have yet to file individual or family returns, Daigneault said he’s seen a mix so far and expects that to continue right up until the filing deadline. The tax code, he said, has been overhauled, but certainly not simplified and concerns are growing as more people grumble about feeling shortchanged by what was billed as sweeping tax cuts.
“If you listened to the rhetoric, it was ‘Oh, we lowered the tax rate,’” Daigneault said. “People were like ‘Oh, this is going to be great.’ Then when you actually do the math and it isn’t, it’s difficult to explain to somebody.”
Daigneault said he recently completed a return for a client who usually gets a return between $1,500-$2,000 each year, but will owe about $70 for 2018.
According to figures released by the IRS last week, more than 13 million returns had been processed so far and the average for refunds is down about 8 percent, dropping from $2,035 a year ago to $1,865.
But for some, the changes in deductions, credits, exemptions, withholdings and brackets — to name a few --mean they won’t be cashing in at all on their 2018 taxes and actually owe money this time.
Daigneault said he understands why people consider this tax season to be more daunting than previous years. The tax code is new to the professionals, too.
“It is confusing and it’s complicated,” said Doreen Harvey, a tax preparer for the Granite United Way’s Volunteer Income Tax Assistance (VITA) program. “There isn’t usually a short and sweet answer for anything involving the IRS.”
Harvey, assistant site coordinator at VITA’s Manchester location, also said it’s too early in the season to characterize the overall impact the tax reform will have on 2018 returns. This is her third year working for VITA, which is a free service to individuals and families with a household income of up to $66,000 annually.
From the limited sample she’s seen so far, Harvey said she’s seen returns averaging from $150-$200 less than the client was getting last year.
“That’s due mostly to the reduction of the tax tables and also the reduction in federal income tax withheld on paychecks,” she said. “While they’re getting smaller refunds, they are getting that money in their paychecks all year.”
Cary Gladstone, senior director of asset building at Granite United Way, said the IRS has been helpful as VITA and its staff of preparers adjust through the first couple weeks of the season.
“I don’t think we’ve had changes this big in a long time,” he said.
Gladstone also recommended tax filers check out the IRS website and its withholding calculator, a tool that can help people adjust the amount of taxes taken from their paycheck so that it covers what they owe.
“If they did have to pay in as a result of the changes, they can have more withheld so they don’t have to pay in next year,” Gladstone said.
The Manchester VITA site, which processed more than 400 returns last year, has done more than 60 returns for 2018 already, which is up about 40 percent from the same time a year ago. Harvey said she expects the increased demand will keep up throughout the season — the first under the new code.
“I think that most people are just anxious because things are so different and you want to be sure that it’s done correctly, so they’re seeking help,” she said.