New Tax Laws Equal Less Tax Refund Money
Since there are new tax laws, many people will find themselves receiving a smaller tax refund this year. Due to the new tax law change, people will receive an average of a 15% drop in their total tax refund. This may sound confusing because in actuality the total amount of tax that most people must pay is actually less.
You Pay Less But Get Less Back
How is this possible? How can you pay less but then somehow get less of a refund? The reason why is because the new tax laws have made over-withholding more difficult as you pay your taxes throughout the year. Essentially, you are getting to use more of your money throughout the year instead of receiving it all at one time in your tax refund. This can be a surprise to some who believed they were over-withholding the same as last year. They can be surprised when they receive a smaller tax refund.
New Tax Laws – Simplifying the System
One intent of the tax law change was to simplify the system. However, this simplification has also caused tax refunds on average to decrease. Certain provisions such as earned income credit and other required reporting on the forms are now designed also to not create excessive amounts for refunds. To further simplify, the government also wanted to put a stop to high over-withholding amounts. The simplification of the system has caused some people to not be eligible for certain provisions under the tax code that would have otherwise elevated their refund in the past.
What Does the Future Hold?
What does the future hold for high tax refunds? In all likelihood, tax refunds could very well even decrease further in the future as the government streamlines the tax system. With simplicity in the system, the government approach to completing tax forms and processing tax refunds would likely result in a more simple system all around. In such a modernized system, you would be forced to accurately pay your tax throughout the year. Then, basic returns may be simplified to the point in which they are nearly automated through an online, government interface. This system could take a huge burden off of what government funds are required to operate the IRS. However, it would likely further decrease the amount of the average tax refund.
