| With the 2019 filing season it is important for our clients to be aware that, due to tax reform and the changes to the withholding tables, some of you may receive a surprise when you see the results of your 2018 federal tax return in the form of a lower refund- some may even show a balance due. This is because of “Tax Cuts and Job Act” changes such as the elimination of exemptions, the increase in the standard deduction, the elimination and limiting of certain itemized deduction and elimination of certain other deductions. The taxpayers that are most likely to be affected are: Two wage earner households Taxpayers who itemize Individuals who have non-wage income as well as W-2 wages Individuals with more complex tax situations Even though 2018 federal withholding tables reflected the lower tax rates and increased standard deduction, they could not fully take into account the other tax law changes such as the suspension of dependency exemptions and reduced itemized deductions. This means that for the taxpayers listed above they will have had less tax withheld from their wages than in the past which may result in a lower refund or in some instances switch them from refund to a balance due. The IRS encouraged individuals to review their tax situation and adjust their withholding throughout 2018; however, the vast majority of taxpayers did not do this which may result in surprised clients. By being aware of the situation, clients can understand what changed on their return for 2018 and what they can do to change the result of their federal return for 2019. |