As we conclude another tax season, many Americans have been noticing that their tax returns have not been as high as they expected. This year, there have been some complicated changes to the tax law that left some taxpayers caught off guard. In fact, the average tax refund is down from last year. And while that might not seem like a lot of money, the shortfalls have added up — to the tune of $6 billion, according to the IRS.
Here at Brennan and Company CPA, PC, we provide tax help and bookkeeping services throughout Philadelphia. If your tax return wasn’t what you’d hoped it would be, you’re not alone. Of the over 71 million refunds the IRS has issued so far, many of them have been less than last year’s — and many other taxpayers found out they actually owe money. Let’s take a look at how the tax reform bill has impacted this year’s season.
The Impact of the Tax Cuts and Jobs Act
There could be a few different reasons why many tax refunds have been smaller this year, but for many Americans, it can be attributed to the Tax Cuts and Jobs Act. For instance, with reduced withholding, many taxpayers’ paychecks grew slightly, resulting in a decreased refund. But even though an unexpected smaller refund can catch taxpayers off guard and even cause them some financial strain, it’s important to remember not to judge your taxes by your refund alone. Even though you might be seeing a smaller refund, a majority of individuals will have a decreased tax bill overall.
The Effect on the Economy
These decreased tax refunds can have far-reaching consequences not just for many Americans, but many business sectors as well. One industry that can expect to take a hit is retail sales. Since their refund is the largest single check that most people receive all year, it presents an opportunity for them to become financially solvent and even provides them with a chance to splurge on a large purchase like new furniture, appliances, or a new car. These types of purchases are likely to decrease significantly in the wake of this year’s lower tax returns.
For more information about your tax return, or for bookkeeping help for small businesses in Philadelphia, call us today at 215-951-5585.