2019 was the first tax year where taxpayers saw the impact of the new federal tax regulations on their filed income tax return. “Don’t shoot the messenger” was commonly spoken by CPA’s and tax professionals when they delivered completed tax returns to their clients, especially for taxpayers with gross income of $100,000 or less. Some taxpayers paid more tax, many others paid less, but everyone seemed to be surprised and unprepared for the change in their refund or tax due amount in 2019.
The main cause of this was that In 2018 employers reduced the rates of federal and state withholding tax that they withheld from the paychecks of salaried employees, so taxpayers who normally received a $5,000 refund when they filed suddenly received only a $3,000 refund in the spring of 2019.
Another big cause that, since the overall structure changed on form 1040, many deductions were no longer allowed, and were replaced by increases in the standard deduction and dependency exemptions.. Taxpayers who were accustomed to taking itemized deductions were no longer eligible to do so.
Were you surprised this year? I welcome your comments. E mail me at firstname.lastname@example.org.
Robert E. McRae CPA