Many Early Filers Surprised by Tax Bill Post-TCJA

Chris Gaetano
Published Date:
Feb 11, 2019

Many early filers used to getting a refund are finding out this year that, due to changes in the Tax Cuts and Jobs Act (TCJA), they actually owe extra money to the IRS, sometimes for the first time ever, according to CNBC. These people are among the 21 percent of people who are anticipated to owe money to the IRS this year. CNBC said that there were two main drivers for these surprise bills. The first was the elimination of deductions that taxpayers had previously relied on, and the second was insufficient withholding. Last year, the IRS updated the withholding tables to reflect the TCJA's changes. But if taxpayers did not make changes to their withholding in line with the tables, and their employers did not withhold enough taxes, their refunds will be smaller—or they will owe money this year.

Consequently, the IRS has reported that the average refund given out so far, $1,865, was 8.4 percent smaller than the average at the same time last year. The service is also receiving, and therefore processing, fewer returns than during the same period last year. As of the beginning of this month, the IRS had received 16.04 million returns, a 12.4 percent reduction from last year, and it had processed 13.31 million, a 25.8 percent reduction. 

Recognizing the surprise and alarm many taxpayers would face this filing season, the IRS announced earlier that it would waive penalties for those who paid at least 85 percent of their total liability during the year through either withholding or early estimated payments, versus the 90 percent threshold that had typically applied. This means that taxpayers will not owe a penalty if they paid at least 85 percent of their total 2018 tax liability. If taxpayers paid less than 85 percent, then they are not eligible for the waiver and the penalty will be calculated as it normally would be, using the 90 percent threshold.

Click here to see more of the latest news from the NYSSCPA.