Some people are calling it the ‘February Surprise’. Some are now fretting after they get some unexpected news from the IRS. Tax filing is well underway.
Some people say they aren’t getting as much money back, but others say they have to pay Uncle Sam.
Dr. Brett Bueltel, an Assistant Professor of Accounting at USI, is here to talk about tax reform and what’s been happening this tax season with returns.
Brad Byrd: Welcome to In-Depth. Some people are calling it the ‘February Surprise’. Some are now fretting after they get some unexpected news from the IRS. Tax filing is well underway.
Some folks who’ve always looked forward to a refund from Uncle Sam and expecting an event larger return this year are shocked and downright made.
Tax reform legislation passed in Washington, and it’s now prompting a simple question: What happened to my refund?
I’m joined tonight by Dr. Brett Bueltel, an assistant Professor of Accounting at the University of Southern Indiana, to sort this out.
Perception is reality for a lot of folks, most taxpayers probably thought they were in for somewhat of a windfall this year, what happened?
Dr. Brett Bueltel: Yes, and I think rightfully so, taxpayers are a little concerned at this time of year, but they’re always anxious, are they gonna get that refund? And how much are we gonna owe? And they’re getting all their documents together, so rightfully so they can be a little anxious about that. But I’d caution them to make sure they’re going through the tax law, understanding all the deductions and all the changes before they come to conclusions. Like is this going to negatively impact me? There are a lot of reports out there about possible smaller refunds and there’s a lot of different variables that contribute to that. It’s very early in tax season, for one, to make a conclusion about how this is going to impact the tax payer population as a whole. Also, there’s a 35-day government shutdown that just happened that could impact possible filing and holdups and getting returns processed. So, that’s another consideration, but also the withholding in 2018 were changed and I think that has a significant amount impact in what’s happening now.
Brad Byrd: And it was basically a situation where at least through reports in the mainstream media, that this was going to simplify matters, but it appears as though a lot of people are still very confused through all this.
Dr. Brett Bueltel: Yea, tax is never an easy subject and tax laws, one of the goals was to simplify things and I think the increased standard deduction was one of those things they tried to pass to make sure that it was simpler. So, with the increased standard deduction going from $12,700 for married filing joint going up to $24,000, that would limit the amount of people itemizing. So, because you’re not itemizing, it was supposed to make it a little simpler, but tax is a very complex subject and anytime a massive change like this happens it could make things a little more complicated for tax payers because they’re so used to doing things under the old law.
Brad Byrd: And it is complicated, but sometimes I know the media is criticized because it appears, we’re in the headline’s society today – Twitter and Facebook – really digging in as far as the numbers are concerned. Say if you do owe, what do you do at this point? Because I’ve heard withholding has a lot to do with this.
Dr. Brett Bueltel: Yes, yes, I think when we’re talking about refunds, we need to understand where does a refund come from? And a refund is based off of your tax liability and tax withholding. So, tax withholding is the amount that’s withheld from your paycheck each month, and your tax liability is the amount that your gonna owe the government at the end of the year. So, you try to estimate as best as you can, but with this new tax law change, I think a lot of taxpayers were a little uncertain if they needed to make any changes to their current withholding situation, so that could be a contributing factor definitely to lower refunds or maybe possibly owing.
Brad Byrd: And exemptions disappeared with this tax reform legislation?
Dr. Brett Bueltel: yes.
Brad Byrd: And from day one, most of us were always told zero exemptions, no more than one, even if you claim up to four or whatever. But exemptions are gone. So, if you determine what you need to have withheld from your payroll check, where do you go to? I mean, where do you go in that instance?
Dr. Brett Bueltel: I would recommend the IRS.gov website, they have a great withholding calculator. And it’s not the easiest thing to navigate because it asks a lot of different questions that requires a lot of predictions, so I consider it more of an art than a science because you do have to make a lot of predictions. Especially those with irregular incomes, it can be difficult to figure out exactly how much they should be withholding. So, I think that’s something that taxpayers are going to need to do for next year. Definitely, look at their withholding and see do I need to withhold more from my paycheck each month to make sure that I’m not, I don’t have this sticker shock at the end of the year with this big tax bill or a lower tax refund than I was expecting.
Brad Byrd: And more and more people are doing this online without the help of an accountant. That has a lot of benefits, it’s easy, in many cases, it’s free, but that’s not the case necessarily this year because this is somewhat confusing.
Dr. Brett Bueltel: Yea. And a lot of taxpayers do things online, that’s great, it’s definitely a cost savings, but if this new tax law is complicated to you, or you’re a little confused, I would always recommend going to an accountant. At the University of Southern Indiana, we actually have a volunteer tax assistance program that’s available for mid-to-low income individuals. And we have 15 students who prepare tax returns for free. So, if you’re one of those that you don’t want to do it on your own, but you don’t want to pay an accountant, you might want to check out the USI Vita program – we operate on Monday evenings, you can call our Romain College of Business Office, if you want to make an appointment with us.
Brad Byrd: And if you have seen an accountant, if you find that you have a much, much smaller refund, that you possibly owe and you’ve never owed before, second opinion worth while on that? Second set of eyes?
Dr. Brett Bueltel: Possibly. And it’s going to depend on each individual situation. And it’s difficult to look at, especially when you’re looking at withholding – people with the same income could have very different amounts they should be withholding. So I would always recommend if you’re a little confused to seek out another opinion whenever you think it’s necessary.
Brad Byrd: Dr. Brett Bueltel thanks a lot for joining us. Dr. Bueltel is an assistant professor of Accounting out at USI. I know it’s not an easy topic to talk about.
Dr. Brett Bueltel: Definitely, definitely not.
Brad Byrd: Putting it in laments terms.
Dr. Brett Bueltel: Thank you for having me, I appreciate it.
(This story was originally published on February 14, 2019)