The new tax law signed with much fanfare by President Trump last year has already had a major impact, with many companies handing out bonuses and others pledging to raise their minimum wage thanks to their new tax savings. But some Americans may be in for a surprise when they go to file their taxes next spring. A new report from the Government Accountability Office (GAO) warns that a larger number of Americans will have federal tax under-withheld this year, thanks to changes in withholding in the new tax law. That means those folks will end up owing money to the IRS, rather than getting a refund. Specifically, the GAO estimates that 21% of taxpayers will owe money this year, up from 18% who owed last year.
Houston accountant Randy Reimer, partner at Reimer, McGuinness & Associates, says most people will still get a refund, although it may be smaller than last year's. "All things being the same in '18 as they were in '17, I don't think very many people will see their taxes going up," he tells KTRH. "It's a very unique group that's going to have their tax go up."
That unique group includes people with multiple children who itemize deductions. "If you had six or seven kids, you were getting some really huge dependency deductions and potentially some really big child credits...there are some limits on those now," says Reimer.
The best thing you can do right now is to check your paystub to make sure your employer properly adjusted your withholding after the new law took effect. "I would definitely suggest here in the middle of the year, to check and look at your withholding, look at your income and what does the 2018 year hold for you," says Reimer. "Especially if you have kids or have really high itemized deductions, it would definitely be worthwhile to take a look and see what impact (the new law) is going to have."