Under the new tax code, average refund lower this year
FREMONT, Calif. (KTVU) - The IRS reports that the average refund is lower for people compared to last year due to sweeping changes to the tax code in 2017.
According to data released by the IRS on Friday, the tax season is getting off to a slower start. The agency has processed about a quarter less returns compared to this time last year.
Under the new tax code, your refund could be lower.
Certified Public Accountant Bart Anderson of Bart Anderson & Co. in Fremont said the main difference is that even though taxes are down, withholdings are down.
The recent overhaul of the tax code brought many changes. The standard deduction nearly doubled for most taxpayers. The personal exemption is gone. Tax rates went down, but some people may not get the refund they were expecting if they adjust their paycheck withholdings.
“A lot of people come in thinking, well if my taxes are going down my refund should go up,” Anderson said. “That may not be the case however for people who have their taxes withheld because IRS issued new reporting tables to correspond to the rate reductions this year.”
The IRS data shows the average refund is down 8%. Last year’s average refund was $2,035 while this year it is at $1,865 so far. That means refunds are smaller by an average of $170.
Anderson said your filing status could also affect your refund.
“If you have two earners that are both going on the same return, sometimes the withholding tables don't account for that properly,” he said.
Other changes include tax cuts for companies, which lowered the corporate tax rate from 34% to 21%. Experts say getting a smaller refund doesn’t mean you’re paying more in taxes.
“My advice is start early. If there's going to be tax due, you'll want to know as soon as possible,” Anderson added.