Why You Might Be in Tax Debt This Year
Who doesn’t love a surprise tax bill?
Most people are expecting a tax refund this year thanks to the Tax Cuts and Jobs Act passed in 2017, which cut rates and doubled the standard deduction. But at least some people who have always received refunds in the past will owe money when they apply this year, according to the IRS .
“While most tax fillers for 2018 are expected to receive refunds, the number of individuals payable in taxes and, in some cases, fines is likely to be higher than in recent years,” the agency said in a statement.
This is likely to apply to people “with complex taxes and those living in high tax states like New York and New Jersey,” according to CBS News , as well as those who have written articles in the past. but this year will receive an increased standard deduction – especially if you did not check your deductions last year . The tax legislation has increased some tax breaks and deductions, completely excluding or limiting some others, which could cause some confusion.
The IRS notes that households with two employees and workers with non-wage income sources are also more likely to be in arrears, as well as retirees and dependents, if they did not adjust their deductions in the past year. Adds IRS:
In addition, various financial transactions, especially at the end of the year, can often have unexpected tax consequences. Examples include year-end and holiday bonuses, stock dividends, capital gains allocations from mutual funds and stocks, bonds, real estate, or other property sold at a profit.
And as I wrote here , many people may receive less refund than anticipated as they have already received tax breaks on their salaries during 2018. CBS News reports:
Since the tax bill cut tax rates by 1 percentage point to 4 percentage points, most middle-class Americans see much less tax cuts.
According to the Institute for Taxation and Economic Policy, the average 20 percent of income recipients – or people who earn between $ 42,000 and $ 67,000 a year – have dropped their taxes by $ 800. That’s about $ 33 for a salary.
If you didn’t pay enough during the year and owe money to the IRS, you could also be fined, although the agency is softening it a bit this year due to the 2017 tax law confusion. You need to apply as soon as possible to minimize penalties.