Average tax refunds are down 8.4%

[Tiggs 6,093]

The first U.S. tax filing season under the overhaul that President Donald Trump signed into law at the end of 2017 got off to a slow start in the first week, with data released on Friday showing a significant drop in returns and refunds.

According to the Internal Revenue Service, the total number of returns received in the week ending Feb. 1, 16.04 million, was down 12.4 percent from the week that ended on Feb. 2, 2018. Only 13.31 million returns were processed, down 25.8 percent from the year before. The average refund of $1,865 was 8.4 percent smaller than the average refund in the period last year.

Source: CNBC

[Hankenhunter 1,995]

Might be the time to invest in blood pressure meds. There's a lot of angry Republicans who had plans for their tax rebates. Merry Christmas to all the filthy rich. Best Christmas ever! For them only.

Edited February 12 by Hankenhunter

[lost_shaman 2,487]

Refunds are down because when the Tax cuts went into effect people got to keep more of their money from their paychecks instead of that money being withheld by the Feds.

[Wickian 3,820]

That's what happens when you pay less in taxes throughout the year and get more take home.

[Gromdor 8,173]

5 minutes ago, lost_shaman said:

Refunds are down because when the Tax cuts went into effect people got to keep more of their money from their paychecks instead of that money being withheld by the Feds.

I don't know of anyone that changed their W-4's because of the Trump tax cut.  Do/Did you? 

[and then 29,457]

10 minutes ago, Gromdor said:

I don't know of anyone that changed their W-4's because of the Trump tax cut.  Do/Did you? 

If you make 50K and they take 10% for example, your refund would reflect how much they took over what you really owed if you could afford a good CPA who knows all the angles.  If the percent they take of your 50K is smaller then wouldn't the amount "over" be smaller as well?  Hence the "smaller" refund?  Math causes me headaches, this is an actual question, not a barb.   

[Gromdor 8,173]

2 minutes ago, and then said:

If you make 50K and they take 10% for example, your refund would reflect how much they took over what you really owed if you could afford a good CPA who knows all the angles.  If the percent they take of your 50K is smaller then wouldn't the amount "over" be smaller as well?  Hence the "smaller" refund?  Math causes me headaches, this is an actual question, not a barb.   

We have new employees fill out a form called a W-4.  It contains the number of allowances the employee wants the company to hold back in the taxes it gives the government.  I'll give a link, but it will make the average guy's eyes cross: https://finance.zacks.com/much-difference-additional-allowance-make-federal-withholding-amount-4210.html

Long story short, no one under my responsibility in the company asked me to change their allowances, so theirs is all the same as last years.  Likewise the government didn't do an 8% increase in in the amount the allowance gives you.  So they are more or less paying in roughly the same amount in taxes off their payroll as last year.  One guy did complain to me for 1/2 hour on how his return was $5,200 less because all the itemized deductions were gone and in construction we tend to itemize heavily, especially the powerhouse guys that travel from power plant to power plant.

[lost_shaman 2,487]

25 minutes ago, Gromdor said:

I don't know of anyone that changed their W-4's because of the Trump tax cut.  Do/Did you? 

When the Tax rates went down, with holdings also went down. You did not have to change your W-4 for this to happen.

[Gromdor 8,173]

9 minutes ago, lost_shaman said:

When the Tax rates went down, with holdings also went down. You did not have to change your W-4 for this to happen.

Not enough to cause an 8% reduction.....  The annual basis went from $4050 to $4150.  So each deduction give you roughly $100 more a year.    The guys tend to do 0 or married and 9.  I personally did 1.  If what you said was true the guys claiming 0 would have an unchanged tax return, the guys claiming married and 9 would have to pay the same amount in (because they are basically claiming tax exempt) and I would see $100 difference.  None of this has been the case for us so far, because we can no longer itemize and have had to pay more.

Edit to add: I can't honestly say Trump has screwed me yet, though.  I received notification from the IRS that my severance pay from the military was made tax exempt by this latest law retroactively.  If I had my original tax return I could refile for the regular amount or I could claim the standard $1700 refund.  I opted for the $1700 refund.  The IRS sent me a check for $6,400.  $1700 for the original refund and $4700 in interest......

Edited February 12 by Gromdor

[Agent0range 4,178]

35 minutes ago, lost_shaman said:

When the Tax rates went down, with holdings also went down. You did not have to change your W-4 for this to happen.

Well, as a Federal Employee, I can say I'm a pretty easy case to analyze.  We have an Employee Personal Page, where you can see each pay period, net and gross pay.  I work a set schedule, I choose not to work overtime.  My pay has stayed exactly the same since before the tax cuts (they took place after our 1% pay raise and now pay is frozen.)  I get paid whether I go to work or not, because I use my accrued leave.  My income has stayed the same, and my tax refund has gone down.  I don't know the specifics, but I believe the middle class was said to have gained thousands from the tax cuts?  I took home more money before the tax cuts.  

[Imaginarynumber1 17,035]

3 minutes ago, Agent0range said:

Well, as a Federal Employee, I can say I'm a pretty easy case to analyze.  We have an Employee Personal Page, where you can see each pay period, net and gross pay.  I work a set schedule, I choose not to work overtime.  My pay has stayed exactly the same since before the tax cuts (they took place after our 1% pay raise and now pay is frozen.)  I get paid whether I go to work or not, because I use my accrued leave.  My income has stayed the same, and my tax refund has gone down.  I don't know the specifics, but I believe the middle class was said to have gained thousands from the tax cuts?  I took home more money before the tax cuts.  

Polls have shown that less that 50% of people report seeing any change in their pay and the average gain is about 18 dollars a paycheck 

[Agent0range 4,178]

Just now, Imaginarynumber1 said:

Polls have shown that less that 50% of people report seeing any change in their pay and the average gain is about 18 dollars a paycheck 

I believe it.  That's huge difference from thousands!

[DieChecker 19,750]

I have not done my taxes yet, but I've heard many people feel they've been screwed. My father in law went from a tiny return (less then $100) to owing $3000. Wow! With no major changes for him or my mother in law.

I hope I don't get hit as hard. Though with Intel giving good bonuses I went over $100k for the first time.

[susieice 16,577]

I haven't filed my taxes yet, but I get the feeling I may be totally wild when I do. I became disabled over the year so I had disability insurance payments through my employer. My long term took out taxes after my short term expired in six months. I have SS disability and I worked for 2 months. The Federal Government took a lion's share out of my 401K before I even saw anything, and I didn't get much. I have saved a couple thousand for when I get hit with this. Then I have to file state and local also. Not hearing good things.

[Gromdor 8,173]

7 minutes ago, susieice said:

I haven't filed my taxes yet, but I get the feeling I may be totally wild when I do. I became disabled over the year so I had disability insurance payments through my employer. My long term took out taxes after my short term expired in six months. I have SS disability and I worked for 2 months. The Federal Government took a lion's share out of my 401K before I even saw anything, and I didn't get much. I have saved a couple thousand for when I get hit with this. Then I have to file state and local also. Not hearing good things.

Honestly, if you don't normally itemize and normally use the 1040EZ, chances are you should be just fine.  The ones hit are the ones with high job related costs that they were able to deduct in the past.

You might take a hit if you have high medical expenses that you deducted in the past and are still deducting.  They increased it from whatever was 7.5% of your gross pay to whatever is over 10% of your gross pay.

Edit to add:  I feel horrible whenever I hear about people cashing in their 401k's for emergencies.  That's for your retirement.  Cashing it in is pretty much sacrificing your future for a present emergency.

Edited February 12 by Gromdor

[susieice 16,577]

1 minute ago, Gromdor said:

Honestly, if you don't normally itemize and normally use the 1040EZ, chances are you should be just fine.  The ones hit are the ones with high job related costs that they were able to deduct in the past.

You might take a hit if you have high medical expenses that you deducted in the past and are still deducting.  They increased it from whatever was 7.5% of your gross pay to whatever is over 10% of your gross pay.

I've always filed 1040EZ and have no medical deductions or work costs that I've ever claimed. My insurance at the time covered me pretty well. Because of liquidating everything I had, my income went up by about two thousand. Covering the taxes on what wasn't deducted is what's going to kill me. My work and long term disability paid in taxes. My short term and SS didn't. My Federal was paid in on my 401K but I'm not sure how much I have to pay Pennsylvania. Also my local earned income tax. Right now, I'm just hoping I held on to enough. I'm gonna pay through the nose.

[Gromdor 8,173]

9 minutes ago, susieice said:

I've always filed 1040EZ and have no medical deductions or work costs that I've ever claimed. My insurance at the time covered me pretty well. Because of liquidating everything I had, my income went up by about two thousand. Covering the taxes on what wasn't deducted is what's going to kill me. My work and long term disability paid in taxes. My short term and SS didn't. My Federal was paid in on my 401K but I'm not sure how much I have to pay Pennsylvania. Also my local earned income tax. Right now, I'm just hoping I held on to enough. I'm gonna pay through the nose.

I'm by no means an accountant or qualified to dispense financial advice, but if you had to liquidate your stuff to cover medical expenses, it is deductible.  You might want to look into it before you take the 1040EZ route and pay to much unnecessarily.  Uncle Sam isn't that truly heartless when it comes to medical expenses.  The doubling of the standard deduction and from what it sounds like they garnished from your 401k and disability does make it sound like you should get a fairly decent return, but you might be entitled to more depending on your circumstances.

Edit to add this link:http://www.401khelpcenter.com/401k_education/hardship_withdrawal_article.html

You might be eligible to waive the penalty on your early 401k withdrawal too depending on your circumstances.

Edited February 12 by Gromdor

[susieice 16,577]

3 minutes ago, Gromdor said:

I'm by no means an accountant or qualified to dispense financial advice, but if you had to liquidate your stuff to cover medical expenses, it is deductible.  You might want to look into it before you take the 1040EZ route and pay to much unnecessarily.  Uncle Sam isn't that truly heartless when it comes to medical expenses.  The doubling of the standard deduction and from what it sounds like they garnished from your 401k and disability does make it sound like you should get a fairly decent return, but you might be entitled to more depending on your circumstances.

I liquidated because I had to leave. Couldn't do the job anymore because of my medical condition. My insurance covered my medical expenses. The Federal Government will take a large hunk out of your 401K when you cash it out. It wasn't enough to take payments on and I paid a little into it for 10 years. Only the long term took out taxes. The short term took none. The one thing I have going for me is I'm retirement age. Don't know if that will help or not. I know the IRS can't take more of my 401K because of my age.

[Gromdor 8,173]

5 minutes ago, susieice said:

I liquidated because I had to leave. Couldn't do the job anymore because of my medical condition. My insurance covered my medical expenses. The Federal Government will take a large hunk out of your 401K when you cash it out. It wasn't enough to take payments on and I paid a little into it for 10 years. Only the long term took out taxes. The short term took none. The one thing I have going for me is I'm retirement age. Don't know if that will help or not. I know the IRS can't take more of my 401K because of my age.

Yeah, it's sounding like a bum deal.  Wish I could help more, but that's about all I could think of off the top of my head. 

[susieice 16,577]

3 minutes ago, Gromdor said:

Yeah, it's sounding like a bum deal.  Wish I could help more, but that's about all I could think of off the top of my head. 

Thanks Gromdor. I just know this is going to be one bad year. Just hoping I saved enough to pay what I have to pay. Next year I shouldn't even have to file.

Edited February 12 by susieice

[Gertdoggy 53]

The amount of refund is meaningless. Tax liability it the only thing to measure from year to year. That is a very easy number to look up to see how much less you paid this year compared to last year. If you want a bigger refund just change your withholding status or have your employer take out additional money. So you get a bigger refund basically because you gave Uncle Sam an interest free loan. Not everyone saved a lot of money this year it really depends what bracket you fell in. I think it was around $35,000-$50,000 and $90,000-$120 or so that we saw the biggest savings but don't quote me on those numbers. 

[Tatetopa 5,648]

18 minutes ago, Gertdoggy said:

The amount of refund is meaningless.

In an accounting sense, you are right.  To individuals who get a smaller return, it is a burn that some may view as a betrayal.  

[lost_shaman 2,487]

44 minutes ago, Tatetopa said:

In an accounting sense, you are right.  To individuals who get a smaller return, it is a burn that some may view as a betrayal.  

If you were a Magician, you'd probably call it what it is,... "Sleight of Hand".

[DieChecker 19,750]

11 hours ago, Gromdor said:

Edit to add:  I feel horrible whenever I hear about people cashing in their 401k's for emergencies.  That's for your retirement.  Cashing it in is pretty much sacrificing your future for a present emergency.

OMG. I have a friend who did that. He got laid off at Intel as a programmer, with a year of severance and insurance. But he refused to do any work but programming and refused anything that was "beneath" his ability. So he ended up borrowing out of his 401k to live on for a couple years. And elected not to have taxes withheld. So. When the bill came due he was like $100k in debt to the IRS and had spent about a quarter mill of his retirement. Leaving nothing. Because.... pride. Sad. 

Edited February 12 by DieChecker

[aztek 16,477]

it reminds me of a car salesman "giving you a better price" , lower payments, _{but higher down payment.} same here.