It’s only been a little over six weeks since the longest shutdown of the United States federal government ended, leaving many taxpayers anxious in its wake as they began to file their taxes for the first time since the Tax Cuts and Jobs Act’s massive tax code overhaul went into effect. Data at the beginning of February indicated that tax refunds were coming in lower than in previous years, causing taxpayers to readjust their expectations. Now at the beginning of March, the IRS has released reports that indicate the average tax refund has increased by 1.3 percent over last year’s, coming in at $3,143.
What caused the initial decrease in refunds? Taxpayers still haven’t received a clear answer. A press release from the Department of the Treasury simply stated, “There are many factors that impact refunds on a weekly basis that will normalize over time and lead to useful conclusions.” Though the new numbers suggest a positive shift, many filers continue to be dissatisfied. The number of refunds has decreased by 4.8% as a result of fewer people having filed their tax returns compared to this time last year. Whether a byproduct of the 35-day government shutdown or the result of the Tax Cuts and Jobs Act, taxpayers seem more cautious than ever as they navigate through this challenging tax season.
As for those who didn’t receive a refund this year, they should keep in mind the money they were expecting was already paid to them. How? You may ask. The answer is simple: the tax code overhaul. The Tax Cuts and Jobs Act lowered almost every individual tax bracket. The IRS also released new withholding tables that altered how much tax employers withheld from employee paychecks. As a result, many workers saw their paychecks increase in 2018, even if they didn’t receive a raise. This is a sobering reminder that the goal in paying taxes is technically to break even, or at least come as close as possible.
Instead of looking to your refund as a kind of springtime holiday-like bonus, it’s perhaps time to look at the new tax code as an opportunity to manage your income more strategically. Regardless of the size of your refund, it’s always in your best interest to consistently set aside money to take care of things like car repairs or plan that big family vacation.
If you have questions or would like assistance navigating the new tax landscape, contact Fricke & Associates, LLC. We’re here to help!