Are you one of the many taxpayers who received a smaller federal refund or owed taxes this year?

Are you asking why? Major tax law changes under the Tax Cuts and Jobs Act along with an adjustment in the tax withholding tables for federal withholding and some state withholding rates resulted in lower refunds or taxes owed this spring.
In mid-February of 2018, the tax withholding rates adjusted to meet the standards set in the TCJA. Adjusted tax tables were an attempt by the IRS and many states to adjust payroll withholding to equal tax liability or come as close as possible to that liability. This resulted in a reduction the size of tax refunds. This adjustment also resulted in higher paycheck take home pay. So, essentially most Americans received part of their refund over the calendar year in 2018 rather than in a large 2019 tax refund check.
Ideally, you want to break even at tax filing time. In other words, either receive a small refund or owe a small amount at tax filing time. However, the accounting and tax profession understand many Americans’ use refunds as a savings vehicle. While this is a method to save money, it is inefficient. The IRS and states’ do not pay any form of interest on the money over withheld. Instead, we recommend a savings method such to automate withdrawals to a savings vehicle such as a Money Market fund or a brokerage account in lieu of extra withholdings. Another option, would be to increase your retirement contributions and enjoy additional tax benefits.
However, if you prefer to continue receiving large refunds each spring, let’s take a brief look at how to increase your refund size for 2019’s tax refund. Withholding taxes are based on many things: marital status, allowances/exemptions, payroll frequency and salary/wage amount to name a few. Complete a new W4 (you can find the pdf form at https://www.irs.gov/pub/irs-pdf/fw4.pdf) and submit it to your Human Resources Department. Remember the more allowances you claim the less tax withholding is deducted from your paycheck. Claiming Single instead of Married, for example will also increase your tax withholding each pay period. The key is an annually review of your withholdings through tax planning.

Contact your accounting or tax professional today to prepare for 2019 tax filings.