While many apparently missed it, last January the IRS updated the income tax withholding tables for 2018, reflecting changes made by the tax reform legislation enacted in December 2017. The effects have reportedly caught many unawares – this week we asked NAPA-Net readers to weigh in.
For many, that should have meant an increase in their take-home pay, beginning in February.
But, according to the headlines, at least the first wave of filers saw noticeable reductions in their normal refunds – ostensibly because even though they made no change in their filing or withholding status, the IRS had changed the tables.
Well, the respondents to this week’s NAPA-Net reader poll weren’t caught off-guard. More than three-quarters (77%) said they knew about the change, while another 13% said they knew, but hadn’t really understood what it meant (the rest didn’t know). “I figured they'd probably changed, but I didn't bother checking the effect on me,” explained one.
Change Parse
Not surprisingly (since they knew about the change) 74% of this week’s respondents said they noticed the change in withholding, while one in five said it got “overlooked in other changes in payroll/withholding.”
Also not surprisingly with those numbers, nearly two-thirds (65%) said they had already done their taxes, and another 24% have started.
All that said, half are owing more and/or getting back less this year, while only about 7% are owing less or getting back more, and another 1 in 10 say it’s about the same as last year. For the rest? Well, they say their tax situation will be different, but not because of the withholding change.
As for the response to all this, a modest plurality (30%) said they hadn’t, and didn’t intend to, though nearly as many (27%) said they had made a change last year, 13% said they had made a change, and 17% said they hadn’t made a change – yet. The rest also hadn’t – because they didn’t want to make Uncle Sam an interest-free loan.
Reader Comments
As for comments – well, there were quite a few this week. Here’s a sample:
- “HR made adjustments to withholdings in February of 2018. Whatever tables they used to make the adjustments have caused my taxes to go from a decent refund to I owe a decent amount.”
- “Don’t like giving the government an interest free loan for the year.”
- “No interest-free loans here. I'd be happy to owe (just not too much).”
- “Oh, I have so many things to say. I was just giddy – giddy! – reading all these articles about people who used to get these big fat refunds and now were getting little or were even having to pay. I realize that's mean of me, but I am not a nice person. As an intentional strategy or as something inadvertent, I find tax refunds and people’s reactions to them lame, so that’s why I reacted the way I did. As for me personally, we were able to make some large charitable contributions in 2018. I thought for sure we’d be getting a fat refund of our own. It turned out not to be that much. We had been paying the feds in previous years, now we were getting about the same amount back. Definitely better than paying, but not the overwhelming amount I thought it would be. So I guess I am no better than the people I was making fun of. Oh, well. C’est la vie.”
- “The entire tax code is clear as mud....”
- “I redid my withholding based on the IRS’s updated calculator, so I'll get to see how good it really is at making its estimates when I file. However, I don’t expect to be holding a page of freshly minted dollar bills as a result.”
- “Logically, I understand that it’s an interest free loan, but I really like getting that refund after the end of the year!”
- “Total tax amount is lower but the lower tax table means I owe more to the IRS. So, no refund this year.”
- “I learned a long time ago not to loan money to Uncle Sam, interest free. I tried using the 2018 IRS tax calculator which was helpful along with other ones available through the internet. Some of the calculators came up with different results based on the same facts so that was a bit frustrating. Overall, I believe I will pay a lower interest rate but will have to see once I complete my tax returns.”
- “I always try to make sure that I owe at the time I file, but try to make sure that it is close to the amount that I have saved to pay the tax liability. Unfortunately the tax law changes will result in higher taxes for me. I was able to be prepared for that by using the IRS calculator.”
- “I live in NJ; property taxes are too high and state taxes are too high. Might have a lower tax bracket, but deductions are too limited. We owe quite a bit more money.”
- “Once the new withholding took effect, I realized I could put at least another 2% into my 401(k) plan and still receive the net check I was used to. So that’s what I did. I guess this reduced my total withholding even more as it had the effect of reducing my taxable income, but it resulted in more in my retirement plan and maybe a 15% reduction in my ‘usual’ refund amount.”
- “I owe $6,000 this year, as opposed to a refund of $500 last year, due 100% to the elimination of almost all of the itemized deductions. This is the biggest JOKE of all time on the middle class, and nothing but an absolute scam to reduce taxes for corporations and the very rich.”
- “Habits change slowly, and Americans viewed refunds as a ‘bonus’ check instead of an interest free loan to the government. Those of us in the NE corridor and other high tax areas were hit very hard with the reduction of deductions for local and state taxes.”
- “I still contend we should go back to the days of old where withholding didn’t exist and everyone was forced to cut a check to the government for taxes. The physical acts of having to plan, save, and actively pay taxes alone would cause more people to question the value, size, and appropriateness of government. Also, the average citizen is completely uneducated about how refunds work. As for the news outlets, not only are they uneducated but also agenda driven. Sad!”
- “I used the withholding calculator in July 2018, realized my withholdings were going to be very short and bumped up my federal and state withholding. My goal was break-even and I think I did it, but only because I was paying attention. I have done my taxes for 2018 and basically broke even with a $450 fed and $30 state refund.”
- “Yes, the restrictions on SALT deductions COST ME BIG TIME. My tax LIABILITY (actual taxes on my rather unchanged income) have gone UP by about $16,000.”
Thanks to everyone who participated in this week’s NAPA-Net Reader Poll!
On a closing note: The IRS now reports that the typical payment processed through the end of last week was nearly identical to what the agency said it paid out this time last year – $3,068 on average, compared with $3,046 in 2018. The share of filers receiving refunds – 82 percent – also matched figures from the same period last year.
