H&R Block Data Finds Vast Majority of Taxpayers Didn’t Update W-4s

With the 2019 tax season now in its final stretch, one of the big stories to emerge has been the shrinking refunds Americans have seen. While anecdotes suggested that most refunds were down, new data from tax prep firm H&R Block (reported on by Marketwatch) shows that they actually increased on average — but only by about 1.4%. At the same time, 2018 tax liabilities for individuals fell by a nationwide average of 25%. So why the discrepancy? The main culprit seems to be that that most taxpayers failed to update their W-4s for the new tax year following the passage of the 2017 Tax Cuts and Jobs Act (TCJA). In fact H&R Block found that 80% of respondents said they didn't make changes to their filings. Because of this many workers likely saw larger paychecks that have now led to lower refund amounts. Looking across the nation, the amount that a taxpayer's liability and/or refund changed in 2018 could depend greatly on what state they were in. Overall residents of New Jersey, Massachusetts, and California were found to see the largest decreases in their tax liabilities, with the average Garden State worker paying $1,972 less in taxes in 2018 than in 2017 — marking a 29.1% decline. Meanwhile the national average was a $1,200 tax liability decrease. Given that information, it may be surprising to note that New Jersey was also the state where refunds shrunk the most, decreasing by an average of $179. Similarly those in Maryland and D.C. say refunds fall by $176 and $172 respectively. As for those in South Dakota, Oklahoma, and New Mexico, they all saw refunds increase between $150 and $200 on average. Since measuring tax refunds and total tax liabilities can tell two very different stories, executive director of The Tax Institute at H&R Block Kathy Pickering warns that taxpayers should actually pay more attention to their W-4s and refile them as needed. As she explained, "All these moving pieces have made it hard for people to understand the TCJA impact on their individual situation. Relying on their refund size to determine what tax reform means to them may not only be misleading, but can also put them further at risk of not getting the tax outcome they want when they file next year." The argument over whether large tax refunds are good or bad is complicated. On the one hand, there are those that argue that large tax refunds mean you're more or less giving the federal government an interest-free loan. However others suggest that receiving these funds throughout the year in your paycheck makes it more likely that you'll spend them whereas refunded cash may be used more responsibly. Regardless of which philosophy you subscribe to, adjusting your W-4 now can help ensure you get the refund you want (or don't want) for next year.

H&R Block Data Finds Vast Majority of Taxpayers Didn’t Update W-4s was originally seen on DyerNews.com