It has been hurtful to a lot of our middle income clients thus far. Larger families used to getting the $4,050 deduction per family member/child, PLUS their itemized deductions have been negatively impacted. For example,
a family of 4 who typically itemized $18,000 work of deductions would have seen a reduction of $34,200 off of their taxable income. Now they only get $24,000. Also, the $2,000 per child tax credit is not all a CASH back credit like the previous $1,000 was. $600 of it gets applied to any tax due. If you have zero tax liability, you only get back $1,400. Child tax credits are lost the year the child turns 17, even if they turn 17 on December 31st. After that, they only get a $500 credit on the return. Finally, there are umpteen forms now. Seven new schedules in addition to the Schedules A through F. This means increased tax preparation fees for the preparers that charge by the schedule and not by the hour.
One last item unrelated to the tax preparation was the change made to the W2 tax collection by the IRS from wages. The percentage was reduced. So while people recognized more money in their paychecks, less taxes were collected. Refund means the IRS took too much from you, and now they are giving it back to you. Having collected less from taxpayers last year, there is less to give back. This has resulted in some of our clients having reduced refunds upwards of $1,000, depending how much LESS taxes were deducted from them. We are trying to help with strategies and advice on how to fix it for next year. But the sad faces leaving our offices this season are painful to watch. |
