Americans are feeling the effects of the new Tax Cuts and Jobs Act as they file their 2018 taxes. Some of them were disappointed after receiving a smaller refund than they anticipated, while others received unexpected tax bills.
The Internal Revenue Service (IRS) data, however, shows that the average refund for 2019 is now on the same level of the average refund in 2018 as of March 8. This is beneficial for those who haven’t filed their taxes because the average refund was at a season low of 17 percent in mid-February, but increased to 19 percent a week later due to child care and income tax.
A Financial Stress for American Families
The tax refund affects the income, savings, and spending habits of American families, a JPMorgan Chase Institute study states. The daily spending patterns of families, as well as their checking account balances, are higher when receiving a refund.
Looking at the situation of the new tax policy, the finances of many Americans might suffer due to lower refunds or unexpected tax bills. Families could be in financial hot water this year, and their spending habits will have to adapt to the situation. But finance experts have a positive outlook; they expect families to adjust to the new normal.
The IRS, meanwhile, released the Notice 2019-25, expanding tax relief to 80 percent for people facing underpayment penalties. Underpayment issues are a big thing this tax season, especially with all the changes in the new tax law. That is why the IRS urged taxpayers to check their withholding.
Why Do You Need Tax Relief?
Taxpayers are required to pay a minimum of 90 percent of the tax you owe or 100 percent of the taxed owed in the previous year. Failing to do so may result in a penalty. If you’re in this situation, you should know the IRS tax relief program options to help you reduce your tax liability. It usually provides aid for a certain event, like to hurricane victims.
Individuals usually receive tax relief in various ways, including:
Tax deduction – a process where your taxable income will be reduced.
Tax credit – this is where you get more tax savings than tax deductions because it directly reduces your bill dollar for dollar compared to just decreasing the amount of income subject to taxes.
Tax exclusion – it reduces the amount that you report as gross income.
Tax debt forgiveness – this allows you to settle your tax debts for a percentage of the original liability.
Claiming Tax Relief
With all the technicalities and procedure, claiming tax relief can be exhausting. Work with a tax relief attorney to help you weather the storm. Your attorney will walk you through your tax relief options, which allow you to pay off your penalties. For instance, you can make an offer in compromise (OIC) or apply for an installment agreement as long as you meet the requirements.
Given the overwhelming changes in the tax policies, the IRS urges people to be vigilant about their withholdings. Insufficient withholdings lead to owing money in tax time, but paying in excess will give you a large refund.