Many people filing their taxes are getting a big surprise this year and not in the way they’d like.
It’s the first tax season since the congress adopted the new federal tax law.
Some Americans get bigger tax breaks
However, there are also fewer deductions and exemptions for some taxpayers.
The IRS issued a new tax withholding table to make up for some of those losses, but one local accountant says it’s backfiring on a lot of unsuspecting taxpayers.
“There’s going to be a lot of angst out there and a lot of angry people,” says Rick Oelrich, president of Oelerich & Associates in Davenport.
Tax season looks very different this year for many of his clients.
“There’s a lot of different questions in regards to the new tax law. We could spend two hours here easily talking about that,” he says.
For those who are self-employed or own businesses, the returns look good.
“Huge, additional tax deduction– Many of them are seeing lower taxes,” Oelerich says.
But for others– not so much.
That’s because the new tax code gets rid of some deductions.
“One of the most difficult things I’ve seen for a lot of my clients like salesmen, construction individuals who travel around the country, is the elimination of what’s called miscellaneous expenses or employee business expenses.”
Families will see a difference, too.
“Personal exemptions have been eliminated. That was $4,000+ for each child, so that’s been very impactful especially for larger families,” Oelerich says.
He says that impact is also being amplified because of the IRS’ new tax withholding tables.
“I hate to label it as a trick but it almost is a trick.”
It means the government took out less taxes from each paycheck and for many people, they’re finding out that now, they owe money.
“They never even look at this information until they prepare their return… And that’s when they figure out, O. M. G,” Oelerich says.
It’s sticker shock Oelerich had to deliver to one couple on Friday.
“Their tax situation changed from a $4,000 refund last year to owing almost $6,000,” he says.
It’s something Ricky Smith noticed ahead of time.
“They were taking less money out of my paychecks per week,” he says.
Smith is walking away with a lower refund than last year, but says he prepared for it throughout the year– realizing he paid $3,000 less in tax withholding than last year.
Oelerich says if you end up paying Uncle Sam this year, you can avoid it next year.
“Go to your employer and get that additional amount withheld. I’d hate to see that pain two years in a row.”
And for this year, it might help to file early.
“To at least determine what kind of pain you might be existing here,” Oelerich says.
Oelerich says there have been some tax reductions, but not big ones, so if you see a big difference in your tax withholding between this year and last year, that’s when the alarm bells need to go off because it could mean more upfront after you file.