Depending on who you are, your opinion of the politics behind taxes may be favorable or not. Here’s why.
After taking the time and effort to file taxes, most Americans can take a breath of fresh air knowing that they will get a refund. A refund that they can use to pay off their loans, make significant purchases, and deal with financial difficulties.
But what if your refund is far below than what you expected? Worse, instead of receiving money, what if you end up owing the IRS?
Unfortunately, this is the reality of the current tax laws.
According to the IRS, the average refund has gone down by 8 percent.
When President Donald Trump signed the tax cuts in 2017, the government, through the IRS, took quick measures to increase the take-home pay of American workers. However, it also affected their federal withholdings – the money that is automatically deducted by their employers to cover federal taxes.
The 2017 Tax Cuts and Jobs Act also eliminated plenty of popular tax deductions, such as the home mortgage interest deduction and the state and local tax deduction. While this means higher taxes for a few people, particularly the rich business owners, it also meant lower taxes for the vast majority of the Americans, especially middle-class workers.
Reviews of the new tax code suggest that in addition to the smaller refunds, some families are bound to pay more than they did in previous years. In some instances, they might end up owing money to Uncle Sam.
What could be the reason for the unexpected tax bill?
According to the IRS, this is because many employers are not withholding enough from their employees’ paychecks.
Based on the data provided by the Government Accountability Office, (GAO) 21 percent of taxpayers are being under-withheld which means they will owe IRS this April.
What Politicians Say about the Current Tax Code
The Republicans and Democrats have different views on Trump’s Tax Cut.
Republicans, on their statement, said that tax money should be spent only on essential functions, such as maintaining basic infrastructure, ensuring national security, enforcing contracts, and protecting the citizens against criminals.
They support the idea of giving tax relief to businesses. They believe this will enable companies to grow and hire more employees. They are also in favor of limiting the income taxes of individuals so the government can get more disposable income.
For the Democrats, raising certain taxes provides the government with the money they need to fund programs to boost the economy. They also call for tax cuts for the middle-class workers.
How do Americans view Trump’s Tax Cuts?
Despite the increase in their take-home pay, it seems like Americans prefer to overpay for their federal taxes and receive a large refund than underpay and owe money to the IRS.
43% of taxpayers are not sure if they are going to receive a refund this year. Furthermore, nearly 24% report getting a tax cut.
While some are faced with unexpected tax bills, others are reporting smaller refunds this year. Not only do Americans feel strongly against the new law, but they also feel worse about the economy.
IRS’ take on this
The IRS encourages taxpayers to see things in a positive light. According to them, people shouldn’t want to get a large refund because it’s basically giving the federal government an interest-free loan. They say that the new tax code should greatly benefit taxpayers filling the form as they would generally get more take-home pay in every paycheck.
Handling Unexpected Tax Bill
Knowing that you actually owe money to the IRS is such a terrible experience when you’ve been expecting for a refund all year long. If you find that you have an unexpected tax bill, consider requesting for a payment extension. To qualify for the extension, you have to demonstrate that you suffered from a substantial financial loss. If you will not be qualified for payment extension, you can consider cash advance loan for taxes. You can also establish a payment plan with the IRS though there’s a small fee plus interest. Alternately, you can take advantage of your employer’s benefits, such as your 401(k). While there are no penalties associated with delayed repayments, it is considered as taxable income.