The first tax season after President Donald Trump signed the overhaul into law is here and early signs show that you might be disappointed with your refund… if you receive one at all.
The average refund so far is $1,949, which is based on the total number of returns received in the week ending Feb. 8, according to the Internal Revenue Service. That’s down 8.7 percent from $2,135 at the same point in 2018. Keep in mind that these are preliminary figures, which are subject to change as the IRS receives more returns.
While millions of taxpayers got a tax cut last year, it’s unclear how that will affect your refund. The IRS estimates that about 4.6 million fewer filers would receive refunds this tax season and roughly 4.6 million filers were likely to owe money who had not in the past, according to the Government Accountability Office.
We surveyed 550 adults, ages 18-49, with young children to better understand how Americans are weathering the constantly evolving tax environment. Nearly 90 percent of taxpayers believe they will receive a refund under the new law. Yet 47 percent of those polled said they had “no clue” on whether the new tax laws will positively or negatively affect their family’s finances.
“This tax season brings new tax brackets, new standard deductions, changes to itemized deductions and new rules on qualified business income. Frankly, I’m surprised the number of people confused by the tax laws isn’t higher,” said Cathy Derus, a Certified Public Accountant (CPA) and founder of Brightwater Accounting.
We know doing your taxes can be daunting. Here’s what we found when we asked people to describe their feelings and expectations about tax season.
How young families feel about tax season
More than 60 percent of young families felt indifference or negativity about tax season. Another 38 percent were excited, which was further supported by the fact that 87 percent expect to receive a tax refund this year.
Among those people with negative feelings, 16 percent reported that they were stressed and 9 percent experienced dread. Meanwhile, 7 percent were just confused by tax season.
How young families are filing their taxes
Most American families are actively involved in filing their own taxes, with nearly one-third (32 percent) saying they self-file. Another third (33 percent) usually hires an accountant. Meanwhile, 24 percent of taxpayers use tax software without expert help while 11 percent paid extra to have an accountant or enrolled agent assist them online.
“Know what kind of taxpayer you are. If you just have a W-2 from your employer and take the standard deduction, doing it yourself and using tax software is probably fine,” Derus said. “If you’re self-employed, moved states during the year or have a complicated tax situation, that’s more forms to fill out and it makes sense to use a tax professional.”
Consider the value of educational tax breaks
Many young families are missing out on education tax breaks that were a major part of the Trump-approved tax plan.
Sixty-six percent of adults with children do not know what a 529 plan is. Of those who are aware of the advantages of these savings vehicles, that knowledge isn’t translating to action — only 14 percent of those surveyed contribute to a 529 plan or other tax-advantaged savings vehicle.
“Young families are putting on their own financial safety vest first before they are helping their children, which is understandable when you consider that paying back student loan debt is a huge financial hurdle for today’s parents,” Derus said.
Additionally, only 4 percent of young families are using 529 plans to fund private elementary and secondary school education, which was a recent change designed to help taxpayers with young children.
“The reality is that most lower-income and middle-class families are struggling to pay off debt and build emergency savings. This law is only beneficial to those who have the means to take advantage of it,” Derus said.
Why life insurance
Life insurance is a financial safety net for your partner, your kids, your life...
Read moreTake a balanced approach to your refund
Even before receiving their refund, American families have earmarked the money. Nearly 60 percent of taxpayers intend to pay down debt with the money they get back.
Thirty-four percent plan to save the money in a low-interest savings account. Another 29 percent plan to spend the money on something fun and only 16 percent plan to invest it.
Five percent plan to buy life insurance. 
“A big tax refund is forced savings vehicle for many people. You should be intentional with the money you get back,” Derus said. “Do you pay off debt, do you save for retirement, or do something fun?” She said taxpayers should consider taking a balanced approach. I recommend a balanced approach.”
Debt dominates young families’ financial concerns
Young families look forward to tax season as an opportunity to get a little ahead financially, as evidenced by nearly 60 percent planning to pay down debt. But a $1,949 tax refund is far from being enough to help them address their most pressing financial concerns and many taxpayers who were expecting a refund might not get one at all from Trump’s tax plan.
When asked to share what they’d change about their financial life, the leading answer (at 39 percent) is a desire to get out of debt. Another 19 percent need more money to buy a home, 16 percent want to increase their emergency fund and 15 percent desire to save more for their child’s education. Retirement concerns trailed the pack at only 11 percent.
As young families struggle to pay off debt, build an emergency fund or save for retirement, they may find their expectations for a big refund foiled by the changed tax code. Some popular deductions for families, such as moving expenses and state and local taxes, were eliminated in the overhaul.
This tax season may be the most complicated in years, but you shouldn’t dread it. “Don’t wait until the last minute. Make sure you have all your tax information and the most up-to-date tax forms,” Derus said. “If you’re feeling stressed, know that you can file an extension. Just remember that you are requesting an extension on the time to file, not an extension on paying your taxes. If you owe a significant amount, you may want to consider paying now to avoid penalties and paying interest on what’s owed.”
Unless noted otherwise, statistics are from a quantitative survey conducted by Haven Life of 550 people between Jan. 31 – Feb. 4, 2019. People surveyed were between 18 and 49 years old, had to have children 17 years old or younger and file a tax return. The median survey taker’s age was 36 years old and the median household income (HHI) was $59,999.50. Median HHI in the US in 2017 was $61,372.
The opinions expressed in this article are the author’s own. Haven Life Insurance Agency offers this as educational information only. Haven Life does not endorse or offer the companies, products, services and/or strategies discussed here.
Haven Life Insurance Agency does not provide tax, legal, accounting or investment advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal, accounting or investment advice. You should consult your own tax, legal, and accounting advisors before engaging in any transaction. Individuals involved in the estate planning process should work with an estate planning team, including their own personal legal or tax counsel.
The post What young families expect from Trump’s tax reform appeared first on Blog | Haven Life | Life insurance & Personal Finance Tips.
from Blog | Haven Life | Life insurance & Personal Finance Tips https://ift.tt/2IoAljR
This is dummy text. It is not meant to be read. Accordingly, it is difficult to figure out when to end it. But then, this is dummy text. It is not meant to be read. Period.
ConversionConversion EmoticonEmoticon