money Why this tax season could be worse for some taxpayers
Taxpayers who were disappointed last year may get a nastier surprise this tax season if they failed to make paycheck adjustments again, according to one expert.
While the vast majority of Americans have paid less in taxes after the new law went into effect in January 2018, many didn’t alter how much was taken out of their paychecks to reflect the changes.
That meant some taxpayers received their tax savings in their paychecks – even if they didn’t notice – and, as a result, got a smaller-than-expected refund last year or owed the federal government.
“If you had an unexpected or undesired outcome last year because of tax reform, that same outcome – or worse – could happen to you again,” Kathy Pickering, chief tax officer at H&R Block, told Yahoo finance.
Why it could be worse
While the new tax law was in effect for all of 2018, the Internal Revenue Service only changed the information employers use to calculate how much tax to withhold from their employees’ paychecks after the start of the year, Pickering explained.
For many workers, the new withholdings only went into effect in February or March of 2018. So, if the withholdings were incorrect, it was only for nine to 10 months.
For the 2019 tax year, the withholding was in effect for the full 12 months, and if too little was being taken out, you’ll owe more or your refund will be even smaller.
What you can do
Unfortunately, you can’t do anything to change this year’s taxes. But you can avoid a similar outcome next year by adjusting your paycheck withholdings sooner rather than later. Be warned that this will be unfamiliar, because the IRS this year released a new Form W-4.
The new form better reflects the tax law that went into effect in 2018. It no longer has allowances and requires more detailed information. You may need your tax returns handy to fill it out correctly.
“You’ll only be required to complete a new W-4 if you start a new job,” Pickering said. “But you should still consider updating it anyway to avoid a refund surprise next tax season.”
Janna is an editor for Yahoo Finance. Follow her on Twitter @JannaHerron.
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