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Why millions of people are getting hit with a surprise tax bill this year


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Why millions of people are getting hit with a surprise tax bill this year

An effort to make the tax bill look better ended up making it look worse.

 

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Paul Ryan in 2016, then the House speaker and an architect of the tax bill.
 Darren Hauck/Getty Images

Americans who are accustomed to receiving an income tax refund tend to file their taxes early — often in late January or early February when all the paperwork becomes available — but this year many early filers are finding to their surprise that they actually owe money to the IRS.

 

A tweet rounding up other tweets from displeased early filers went viral because the user, @smarxist, deliberately singled out people who are mad at President Donald Trump for raising their taxes.

 

The truth is somewhat more complicated.

The new tax law does result in some people paying higher taxes (especially over the long term), but the specific issue here is tax refunds rather than total taxes paid. Whether you get a refund or owe extra to the IRS at filing time is a function not just of your total taxes owed, but also of how much tax is withheld from your paycheck by your employer on paydays. And the big story here is that as a result of the new tax law, the Treasury Department tweaked things so that on average taxpayers’ withholdings fell by more than their actual taxes owed.

This was all explained in a Government Accountability Office report last summer, but it turns out that many people are not regular readers of GAO reports and did not take the GAO’s official advice to check their withholding status. The result? Surprise tax bills!

Tax withholding, explained

Income and payroll taxes are, in a theoretical sense, collected once a year in mid-April.

In practice, however, the government has employers calculate how much tax their workers are likely to owe at the end of the year. Then each pay period, companies simply forward an appropriate amount of money directly to the IRS and pay you what’s left over. When you file your taxes at the beginning of the year, you compare the amount of taxes you owe to the amount of taxes you’ve already paid and get either a refund or a request to send more money. And historically, by design, most people — around 75 percent — get a refund.

 

That’s because it’s a lot easier for the government to pay out refunds to people who overwithheld than to run around trying to collect cash from people who underwithheld.

What’s more, when underwithholding does happen, it’s usually either because of an error or else a special situation like a person with a full-time job who also happened upon an unexpected bounty of freelance side-gigs. In fact the government hates underwithholding so much that if you primarily derive your income from freelance or self-employment work, they start charging you a financial penalty unless you pre-pay your taxes on a quarterly basis.

This system was, in a fun historical irony, devised in part by Milton Friedman, the famous libertarian economist, who at the time was trying to help win World War II but who wound up being an unsung hero of the post-war welfare state. And the whole thing had been chugging along pretty peacefully until then-House Speaker Paul Ryan, Treasury Secretary Steve Mnuchin, and Trump decided to shake things up.

https://www.vox.com/platform/amp/policy-and-politics/2019/2/6/18214039/irs-tax-refund-withholding-trump

 

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Edited by Mainecat
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Just now, revkevsdi said:

Cue the wailing from Trumpsters. 

“ Waaaah. We no like facts. Take them away. Give us more Trump lies. “ 

Give us some more of your lies.  Those are the real gold!  Did you wrestle back in the day with Tool Kit?  Or was it just your brother?

:lol:

 

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Just now, Zambroski said:

Give us some more of your lies.  Those are the real gold!  Did you wrestle back in the day with Tool Kit?  Or was it just your brother?

:lol:

 

You got bent over like the rest of the Dumpers :lmao: 

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I’m going to turbo tax my shit this weekend....  back to a non itemized return...  it hasn’t  been financially beneficial to take the standard deduction for me for many years.  But over all thru some tax calculators I will be 4-5k less income tax obligations for 2018 vs 2017.  Going to have to pay in around 2k as the witholdings table were pretty generous on keeping more money in the paychecks vs paying it in the taxes.

only way I figure I could do better on taxes on the trump tax plan is if my wife and I divorced.  And I itemized and she took a standard deduction.

 

but I’m not complaining as the new tax plan is much better then the old.

Edited by BOHICA
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22 minutes ago, revkevsdi said:

Cue the wailing from Trumpsters. 

“ Waaaah. We no like facts. Take them away. Give us more Trump lies. “ 

facts like there employer withheld less of a workers check every week because before the new law they were letting the govenment take to much , 

and now the worker is not getting back the money they used to overpay ? and are still paying less overall  ooooh no will the people ever recover from this travesty 

Edited by Ez ryder
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33 minutes ago, BOHICA said:

I’m going to turbo tax my shit this weekend....  back to a non itemized return...  it hasn’t  been financially beneficial to take the standard deduction for me for many years.  But over all thru some tax calculators I will be 4-5k less income tax obligations for 2018 vs 2017.  Going to have to pay in around 2k as the witholdings table were pretty generous on keeping more money in the paychecks vs paying it in the taxes.

only way I figure I could do better on taxes  vs the trump tax plan if my wife and I divorced.  And I itemized and she took a standard deduction.

 

but I’m not complaining as the new tax plan is much better then the old.

I've told the wife that too.  Sad isn't it.

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1 hour ago, Ez ryder said:

facts like there employer withheld less of a workers check every week because before the new law they were letting the govenment take to much , 

and now the worker is not getting back the money they used to overpay ? and are still paying less overall  ooooh no will the people ever recover from this travesty 

That's what the article says, the problem is most folks live paycheck to paycheck and April 15, 2019 is going to be a shock because they spent that extra money at Walmart buying Chinese TV's and other shit products that Walmart sells to their customers.

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1 minute ago, Mileage Psycho said:

That's what the article says, the problem is most folks live paycheck to paycheck and April 15, 2019 is going to be a shock because they spent that extra money at Walmart buying Chinese TV's and other shit products that Walmart sells to their customers.

so no loss they just pissed it away over a yr and don't get to piss it away on another worthless electronics splurge 

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Tax guy looked at what my % was going to be and told me to be careful what my employer takes out with the new rules , this was back in march so I may be in for a little surprise too but it's better to owe em than giving them an interest free loan . 

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7 minutes ago, Mileage Psycho said:

That's what the article says, the problem is most folks live paycheck to paycheck and April 15, 2019 is going to be a shock because they spent that extra money at Walmart buying Chinese TV's and other shit products that Walmart sells to their customers.

Yuh.  So, according to this site’s “intellectually elite”, the tax cuts helped no one but, all here say they have (including you).  Now, these same people will claim nobody is going to be getting their $$ returns.  I wonder what the members will say?  

What world do liberals live in?  It’s not the real one.

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1 minute ago, Sal Rosenberg said:

 

Tax guy looked at what my % was going to be and told me to be careful what my employer takes out with the new rules , this was back in march so I may be in for a little surprise too but it's better to owe em than giving them an interest free loan . 

THIS!!  FUCKING THIS!!!!!!!!

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3 minutes ago, Sal Rosenberg said:

 

Tax guy looked at what my % was going to be and told me to be careful what my employer takes out with the new rules , this was back in march so I may be in for a little surprise too but it's better to owe em than giving them an interest free loan . 

that is what i always have said . i never send my personal check in till the 15th . it sucks to give tgem the 1 big check  but I never forget how bad I get fucked . if more people only stroked 1 check a yr to the Fed shit would change in a fucking hurry 

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You pay $2,000.00 less in taxes, your portion of the debt goes up by $6,000.00 and you think you’ve got a deal. 

Your bank will give you $2,000.00 if they can add $6,000.00 to their mortgage too. 

Maybe you’ll learn to love them like Trump. 

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26 minutes ago, Zambroski said:

Yuh.  So, according to this site’s “intellectually elite”, the tax cuts helped no one but, all here say they have (including you).  Now, these same people will claim nobody is going to be getting their $$ returns.  I wonder what the members will say?  

What world do liberals live in?  It’s not the real one.

C-Corp, suck it Zam :bc:

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36 minutes ago, Sal Rosenberg said:

 

Tax guy looked at what my % was going to be and told me to be careful what my employer takes out with the new rules , this was back in march so I may be in for a little surprise too but it's better to owe em than giving them an interest free loan . 

Agreed but many rely on it. 

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Overall lower taxes and using your money all year is somehow a bad thing. :lmao:

 

All of these tweets couldn't possibly be liberal propaganda.  :lmao:

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