People discovering that they had too little tax taken out of their paychecks last year are in good company. It took National Taxpayer Advocate Nina Olson three attempts to figure out her own withholding.
Olson — who runs an independent office in the IRS to help taxpayers with significant problems — said after last year’s tax law changes she consulted the IRS’s online withholding calculator as well as the withholding tables themselves, and came up with what she believed needed to be withheld from each paycheck.
But “when the paycheck came out, I thought that’s not the right dollar amount," Olson told reporters Thursday after testifying to a House Ways and Means subcommittee. “So, then I went back and I added some more money.”
She said it took her two more tries to get it right.
“How is this filing season going to work” for the “regular old taxpayer?” Olson said.
Because many people don’t have Olson’s expertise or the tenacity to continue fine-tuning the amount of tax they have withheld from their paychecks, they could end up with a surprise this tax season. Some, particularly those who benefit from an expanded $2,000 child tax credit, will end up with a bigger refund.
But others are finding out that the tax law changes and updated tables that tell employers how much to take out of worker’s paychecks are resulting in lower or no refunds at all.
About 21 percent of taxpayers — roughly 30 million people — will end up owing the IRS this tax season, according to the Government Accountability Office. That’s up from 18 percent last year, before the changes from President Donald Trump’s tax overhaul took effect.
So far, the total number of refund dollars sent out this year is down about 3.6 percent, compared to 2018, according to IRS data that goes through Feb. 22. Several bank analysts expect the total value of refunds issued this filing season will ultimately be about $20 billion more than last year.
Stories of lower refunds have put Republicans on defense as they try to convince voters that their tax law was good for the average person’s bottom line. About four in five taxpayers got a tax cut as a result of the law, according to the Urban-Brookings Tax Policy Center. But the law has persistently been unpopular, recent polls have found.
Olson said she “can’t predict” how refund totals will look at the end of the tax season, but said that taxpayers who have a balance due tend to file close to the April 15 deadline to prolong having to pay the IRS for as long as possible.
However, Olson said the number of people who are receiving a lower-than-expected refund or finding out they owe is concerning because “they have allocated that refund for something,” she said.
The trouble is compounded when people find out that they owe the IRS, Olson told the House Ways and Means Subcommittee on Thursday. Those who have a balance due and try to call the IRS for help wait on average 60 minutes. And only about 15 percent of calls get answered at all, she said.
“I am very concerned about this,” Olson said. “It creates more work for the IRS and more burden for the taxpayer.”
