February 23, 2019 - Douglas Myser

Millions hit with surprise tax bill. With all the campaign rhetoric about tax reform, tax relief for the middle class, it has come to the attention of many tax companies, that many exceptions exist to the tax law, and many Americans are getting hit with an actual tax increase, not a tax refund. This is a surprise to many, who thought they were due for a large refund, and increased the number of withholdings, making the tax due even greater.

Americans who are accustomed to receiving an income tax return 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 the IRS money, and are not receiving a refund. Millions hit with surprise tax bill.

The new tax law does result in some people paying higher taxes, 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 the GAO reports and did not take the GAO's official advice to check their withholding status. The result ? Surprise tax bills. That's ok. You can contact a good, reputable Tax Resolution Services firm for advice on how many options exist in the Internal Revenue Code for Tax Relief, like the IRS Fresh Start Program. According to the GAO the number of people whose withholdings are exactly right will stay roughly the same under the new law. The change is that fewer taxpayers should be over withholding and more should be under withholding.