Millions of taxpayers who count on a tax refund to pay bills or fund a special purchase have been in for a shock so far this year. Not only have many consumers learned that they aren’t getting a refund, but many owe additional taxes.
It’s all part of miscalculations associated with the 2017 tax cut bill. Many taxpayers have discovered their employers failed to withhold enough taxes.
The effects of this could be far-reaching. Consumers often use their tax refund to make a down payment on a car or truck. Others use it to pay down credit card balances. Still others need it just to get caught up on bills that have piled up over the last 12 months.
18 percent owe additional taxes
The survey found that 18 percent of taxpayers who had filed their 2018 federal tax return owed additional money, beyond what had been withheld during the year. The survey suggests that as many as 7.9 million taxpayers expecting a refund had to pay additional taxes instead.
Personal finance experts are quick to tell you that a federal income tax refund is actually your money that the U.S. government has been using for months, without paying a bit of interest. But NerdWallet tax specialist Andrea Coombes says many people don’t look at it that way.
“Many people think of their tax refund as a sort of year-end bonus,” Coombes said. “Finding out you actually owe money can be an upsetting surprise.
Coombes says this tax-filing season has been marked by increased uncertainty -- not just because of the new tax law but due to the government shutdown that delayed the start of return processing. Despite that, the survey shows a large number of consumers filed as quickly as possible in hopes of getting their refund faster.
Good and bad surprises
“While it’s great to see a majority of Americans have filed their taxes and many have been receiving their refunds quickly, there’s still some uncertainty,” she said. “Our study shows that taxpayers are facing surprises — both good and bad.”
One of the good surprises is the size of the refund. When pollsters queried taxpayers, it found 60 percent are getting a refund averaging $2.697. Last year the average expected refund was $1,861. At the same time, about one-third of taxpayers getting a refund say it’s smaller than last year.
Wait times for refunds are about the same. Of those getting a refund this year, 41 percent said they got their money in two weeks or less.