Get ready for an unhappy tax surprise Yahoo Finance

Get ready for an unhappy tax surprise

Rick Newman
Senior Columnist
Yahoo Finance January 23, 2019

For many workers, income taxes are on autopilot. Your employer withholds a fixed amount from each paycheck, and when you file your return the following year, it generally works out. About 75% of filers get a refund each year, and it’s usually around the same amount, as long as you don’t change jobs or undergo other big changes.

But big changes hit most taxpayers in 2018, because President Trump signed the Tax Cuts and Jobs Act into law at the end of 2017. The TCJA lowered the overall tax burden for about two-thirds of workers, leaving a majority with slightly larger paychecks. But a quirk could leave some taxpayers with an unhappy surprise as they file their 2018 returns this year, and find that the refund they were expecting is smaller than before. Some people accustomed to a refund could even end up owing money, instead.

Jonathan Smoke, chief economist for Cox Automotive, which owns Kelley Blue Book and other auto-industry services, believes many taxpayers had too little money withheld from their paychecks in 2018, because of a mismatch between changes in taxes owed and taxes withheld. “We think tax withholding tables were too aggressively adjusted,” Smoke told reporters recently at the Detroit auto show. “Withholdings are down close to 4%, even though the tax changes imply they should only be down 1%. That could mean several million people are going to get a smaller refund. And it could snowball.”

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