Tax bill troubles created by the GOP tax bill

Things are slowly getting back to normal at the Internal Revenue Service following the recent federal government shutdown.

Some quick indicators that more IRS workers are back include my email box getting more messages from the agency, more updates on IRS.gov and reports on how well (or not) the 2019 filing season is going.

About that last matter, IRS has resumed its annual weekly postings of tax-filing traffic date. The results are not so good.

Fewer filers, smaller refunds: The key piece of information is just how much smaller tax refunds issued so far this year are when compared to last year.

On average, filers' tax refunds are about $170 lower than in 2018.

Specifically, the average refund after one week of filing (the week that ended Feb. 1) in 2019 is $1,865. At this same point last year, the average refund was $2,035.

That could, of course, be because the IRS is still catching up after enduring, along with the country, the longest federal government shutdown in U.S. history. The agency says it processed 26 percent fewer returns the first week of the 2019 filing season than it did during the same period in 2018.

The IRS is not the only contributor to these disconcerting stats. It reports that fewer taxpayers have sent in returns.

From Jan. 28 when filing season opened through Feb. 1, the IRS received 12 percent fewer returns in the first week of tax filing in 2018.

Of course, the 2018 filing season also got off to a slow start compared to the 2017 season.

And the 2017 vs. 2016 filing season early stats were horrific.

So, as the IRS notes every year, calendar year-to-year comparisons are difficult at this early point in the season. Still, we love to look at the numbers and try to discern patterns.

Deciphering filing and refund changes: One reason there are fewer returns filed so far could be that we're still adjusting to the many changes wrought by the Tax Cuts and Jobs Act (TCJA) bill that the Republicans pushed through while the GOP was still in control of the House, Senate and White House.

Hey, that's how, for good or ill, politics and tax policy work. Victors. Spoils.

But the TCJA now is getting a lot of blame for the smaller refunds.

This weekend's Saturday Shout Out goes to two articles — one by Irina Ivanova for CBS News and the other by Matthew Yglesias for Vox — that detail taxpayer complaints, many of them on social media.

Both articles note that taxpayers share some of the blame by not taking IRS advice to adjust their withholding last year.

Yglesias, however, also examines the possibility that some withholding manipulation might have come into play.

Political withholding tweaking? In pushing the most extensive tax reform in more than 30 years to hurried completion in late 2017, the GOP touted that it would put more money into people's paychecks when it took full effect in 2018.

At the time, there was speculation that confusion about paycheck withholding under the new law opened the door for the GOP to do just that.

Let's be clear. As, Yglesias notes, there's no clear evidence that the White House in December 2017 asked the IRS, then operating under a political person appointed as acting commissioner, deliberately reduced withholding calculations to exaggerate the impact of the tax cut on people's pocketbooks in advance of the midterms.

But the July Government Accountability Office report that confirmed that, reasons aside, that is indeed what happened. Both taxes owed and withholdings went down, writes Yglesias, but withholdings went down too much. So lots of us taxpayers are getting surprised this filing season, many in the worst possible tax way.

In light of this mess, the IRS says it will offer taxpayers a bit of leeway. Usually, when you owe too much at filing time because you under withheld from your paycheck and/or didn't pay enough through estimated tax filings, you face a penalty. In some cases, the IRS says is will waive the under-payment penalty. 

Personal costs or benefits: Have you done your taxes yet? If so, did your tax liability go up or down. More importantly, did you get you an expected refund? If so, how did it compare to prior ones?

And if you got the terrible surprise that you owe more with your 2018 return, how much is your added tax bill?

Personally, the hubby and I are taking a bit of a hit because we still itemize, but now have lost the two personal exemptions that used to help reduce our tax bills.

Whether you won by getting a big(ger) refund or lost by owing tax at filing time, you should adjust your withholding now.

And perhaps let your members of Congress know what you think about your current tax situation vis-à-vis the TCJA.

You also might find these items of interest:

• 6 reasons to file your taxes early
• 6 reasons to wait to file your taxes
• Checklist of material you'll need to file your 2018 tax return

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