Many People Are Owing Money on Their Taxes This Year

CHICAGO - NOVEMBER 1: Current federal tax forms are distributed at the offices of the Internal Revenue Service November 1, 2005 in Chicago, Illinois. A presidential panel today recommended a complete overhaul of virtually every tax law for individuals and businesses. (Photo Illustration by Scott Olson/Getty Images)

No one loves a surprise tax bill.

Last night, I logged onto Twitter and saw a bunch of people who tweeted about owing taxes for the first time in their lives. Out of curiosity, I went and did some digging to figure out what changes happened to the tax code in 2017.

It turns out, many people who filed their taxes early this year found out that they owed much more than in previous years, thanks to the Tax Cuts and Jobs Act which passed in 2017. The bill lowered tax rates and also doubled the standard deduction. Tax brackets were lowered by 1 to 4 percentage points. Some (middle-class) Americans are seeing smaller tax cuts. The bill also makes it so that middle-class Americans would help to pay for wealthy Americans' tax cuts . The IRS tax law increased some tax credits and deductions , but also eliminated others and could also affect retirement security for many Americans in the next few decades.

There is also now a $10,000 limit on state and local tax (SALT) deductions. High earners in many blue states with high property taxes, who usually claim itemized deductions in their returns will be affected. This means that if you relied on deducting your unreimbursed employment-related expenses as itemized deductions, such as cell phones, and mileage, you may be affected. Independent contractors' net profits will now be subject to self-employment taxes, which would be higher than a payroll tax deduction.

So basically, people with complicated taxes and those who live in high-tax states who usually got a refund in the past could end up owing, and in some cases... get a penalty on top of that when they file their 2018 taxes.

According to the IRS, 2 wage earner households along with non-wage income employees are most likely going to owe extra this year. This also includes retirees and anyone with dependents, IF they didn't adjust their withholdings in 2018. Year end and holiday bonuses, capital gains distributions, stock dividends could also cause an unexpected impact on taxes.

Hopefully, you paid just enough during the 2018 tax year to avoid getting that surprise tax bill and fine.

Photo: CHICAGO - NOVEMBER 1: Current federal tax forms are distributed at the offices of the Internal Revenue Service November 1, 2005 in Chicago, Illinois. A presidential panel today recommended a complete overhaul of virtually every tax law for individuals and businesses. (Photo Illustration by Scott Olson/Getty Images)

 
 
 
 
 
 

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