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Dramatic increase

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Needtaxhelp2019

New member
Our household income went up about 10k, and everything else stayed similar- however our Federal taxes owed went up from 1,600 to $5,100.

Tax software says this is because:

$1,680 less witholding
$4,055 less itemized. We itemized, which was 4k more than the standard deduction.
$4,487 less on property, state, local tax deductions.
Married, filing jointly.
Not comfortable giving out more specifics online, but does this sounds ballpark ok? Not OK 'good', but OK 'yeah, that's reality'..

Thanks
 


LdiJ

Senior Member
Our household income went up about 10k, and everything else stayed similar- however our Federal taxes owed went up from 1,600 to $5,100.

Tax software says this is because:

$1,680 less witholding
$4,055 less itemized. We itemized, which was 4k more than the standard deduction.
$4,487 less on property, state, local tax deductions.
Married, filing jointly.
Not comfortable giving out more specifics online, but does this sounds ballpark ok? Not OK 'good', but OK 'yeah, that's reality'..

Thanks
Yes, sorry, but that does sound like "ok, yeah that's reality". In about 50% of our practice the tax law changes have not been kind to our clients.
 

davew9128

Junior Member
Yes, sorry, but that does sound like "ok, yeah that's reality". In about 50% of our practice the tax law changes have not been kind to our clients.
Oddly enough I am finding the opposite. The tax liability has gone down for most, with the only problem being the problems with withholding.
 

LdiJ

Senior Member
Oddly enough I am finding the opposite. The tax liability has gone down for most, with the only problem being the problems with withholding.
We have a lot of clients who itemized deductions and their itemized deductions were close or above the new standard deductions. Therefore losing the personal exemptions really hurts them. In addition, many of those clients who itemized deductions either had high brokerage fees or high employee business deductions so its kind of a double whammy for them. People whose children are in college (whether they qualify for education credits or not) tend to lose out as well. That 500.00 credit for dependents 17 and older doesn't make up for losing the personal exemption for those in the 22% marginal tax bracket.

Certain people with no dependents and who never itemized tend to do well on the tax side...they just have the withholding issue. Some people with younger children, if their financial situation is the right combination of factors seem to do well also.
 

Taxing Matters

Overtaxed Member
Oddly enough I am finding the opposite. The tax liability has gone down for most, with the only problem being the problems with withholding.
I couldn't resist point this out, but if your experience is just the opposite then that means 50% of your clients have benefited from the tax law changes, but the other 50% have not, which would reflect what Ldij said — just different sides of the same coin. :LOL:

Of course, I realize that you mean that more of your clients are seeing benefits from the tax law changes than not. I don't prepare many 1040 returns (few clients would pay my rates for that — I refer most clients to a CPA for return prep) thus my direct experience with clients on this is limited so far. But the CPA firm I use says so far overall they are seeing most clients with lower tax than before. I suspect that the results vary considerably from place to place in the U.S. In parts of the country where state and local taxes are quite high (which is not the case here), for example, the limitations on those deductions probably hurt a lot of taxpayers. Larger families with lots of dependents would lose out too. Retirees with no kids for dependents and houses fully paid off likely come out overall pretty well.
 

PayrollHRGuy

Senior Member
But the CPA firm I use says so far overall they are seeing most clients with lower tax than before.
Yet the media is jumping all over people getting smaller refunds like there was an increase in the tax paid. The tables have been set for years to basically pay many taxpayers a bribe with their own money.
 

LdiJ

Senior Member
Yet the media is jumping all over people getting smaller refunds like there was an increase in the tax paid. The tables have been set for years to basically pay many taxpayers a bribe with their own money.
There are some people however who count on their refunds for certain things. I have a couple of clients who are widows and both living on a fairly modest fixed income. With both of them I started out advising them to have less withholding and both of them said that no, they use their refund to pay their property taxes and that they would never be able to save the money otherwise.

One of them burst out in tears in my office when they realized that their refund was low enough this year that it wouldn't cover their property taxes.
 

PayrollHRGuy

Senior Member
There are some people however who count on their refunds for certain things. I have a couple of clients who are widows and both living on a fairly modest fixed income. With both of them I started out advising them to have less withholding and both of them said that no, they use their refund to pay their property taxes and that they would never be able to save the money otherwise.

One of them burst out in tears in my office when they realized that their refund was low enough this year that it wouldn't cover their property taxes.
It is stupid to give the government a no interest loan. You should direct your clients on how to open a savings account.
 

LdiJ

Senior Member
It is stupid to give the government a no interest loan. You should direct your clients on how to open a savings account.
That is a rather arrogant thing to say. While it might not be your choice as to how handle things Its a way that these elderly widows living on a modest income make sure that the money does not get spent on something else.
 

PayrollHRGuy

Senior Member
That is a rather arrogant thing to say. While it might not be your choice as to how handle things Its a way that these elderly widows living on a modest income make sure that the money does not get spent on something else.
If they made it to old age without knowing how to put money into a savings account and really need to use the tax withholding system to save money maybe their tax professional should have warned them that there was a change in the withholding amounts as it relates to actual taxes owed. Withholding wasn't designed to save up money to pay anything other than withholding tax.

There have been several times that the feds have done things that reduce the refund amounts.
 

LdiJ

Senior Member
If they made it to old age without knowing how to put money into a savings account and really need to use the tax withholding system to save money maybe their tax professional should have warned them that there was a change in the withholding amounts as it relates to actual taxes owed. Withholding wasn't designed to save up money to pay anything other than withholding tax.

There have been several times that the feds have done things that reduce the refund amounts.
We did warn everyone...and you are still being pretty arrogant.
 

Taxing Matters

Overtaxed Member
It is stupid to give the government a no interest loan. You should direct your clients on how to open a savings account.
Pretty much every tax professional advises their clients to estimate their taxes and adjust their withholding/estimated tax payments accordingly so that they are neither significantly over or under paid when it comes time to file their returns. Still, many people like getting that large refund. It ensures they don't owe the government, and it gives them an extra injection of cash. We can say how much better it is to save it, but frankly Americans are terrible savers and saving it is not likely what would happen. And even if you stuck it in a bank savings account, the interest paid on savings accounts today is not great. So it's not like they lose a ton of money doing it. You may not agree with their choices, but it is their choice to make. It's at least better than missing the mark and owing money to the IRS that you cannot pay.
 

PayrollHRGuy

Senior Member
But to count on it, as LdIJ says is happening here, and not make the needed change in the deductions is either the fault of the tax pro or the individual.
 

Taxing Matters

Overtaxed Member
But to count on it, as LdIJ says is happening here, and not make the needed change in the deductions is either the fault of the tax pro or the individual.
It's the taxpayer's fault unless the tax pro did the computation for the withholding and got it wrong. The information was out there about the tax law changes; it was widely reported after the bill passed. If the taxpayer doesn't pay attention to that and take the few minutes needed to ball park how the changes would affect them (or see a tax pro for help with it) that's on the taxpayer. The anger towards the IRS and Trump of most people that got less refund than expected or had more tax due because of withholding issues is misplaced. That problem falls on them. I can fault Trump and the Congress for many things, including some of the things in that tax bill, but withholding problems aren't one of them.
 
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