The Tax Man Cometh

By: 
Judy Kramer
County Reporter
The new Tax Reform Act went into effect January 1, 2018, and Americans are now realizing how the changes have affected them. Although most tax-paying citizens received a tax cut in 2018, some refunds have decreased because of changes in the law such as a new limit on property and local income tax deductions, or because of how the IRS has altered withholding in paychecks. Having extra tax taken out of paychecks to make a refund possible at the beginning of the following year is now discouraged. 
Several local ladies (identified by their first names only) related that their tax experiences were different in 2018 than in past years.
“My husband always has to pay the IRS at the end of each year,” said Donna. “But, he paid $12,000 less for 2018, when we got married, and he received a deduction since his household added an additional person.”
“We haven’t ever had a refund until this year,” said Rosie. “I think it was because we got on Medicare and didn’t have to pay as much for insurance, plus there was the fact that we turned 65.”
“I had to pay more taxes this year,” said Dottie.   And, my tax professional who helped me file my tax return told me that the new tax law hurt children and seniors the most.”
According to www.taxact.com, there were six key changes under the tax reform plan. 1.) There were standard deduction increases. Those single, or married, and filing separately had a $12,000 standard deduction. Those married and filing jointly deducted $24,000; and the head of household deducted $18,000. 2.) The personal exemption of $4,050 for each dependent was eliminated.  3.) The child tax credit increased in value from $1,000 to $2,000, and a new $500 credit for non-child dependents was introduced. 4.) Taxpayers were limited on deductions up to $10,000 in state and local income taxes. Previously there was no cap. 5.) Beginning this year, individuals who choose to go without healthcare coverage for the year will not have to pay tax penalties.  6.) Individuals who purchased a home in 2018 could only deduct interest up to $750,000 in mortgage debt (previously $1 million.) The interest deduction on home-equity loans was eliminated.
The biggest changes came at the top of the income scale where the marginal tax rate fell to 37 percent from 39.6 percent.  Also, the amount of income that brings taxpayers into the top tier was raised from $470,700 to $600,000. 
Some of the controversial changes included limits on deductions on state and local property tax. According to an online article in a February 2019 issue of the Houston Chronicle, those with modest incomes probably came out ahead by using the higher standard deduction. But, married couples who own big houses and have high property tax bills could lose on deductions. It is expected that itemizing deductions will no longer be beneficial to many tax filers.
A talk with a local tax business in Warsaw revealed that most of its clients did not itemize deductions this tax season, although it is possible to itemize if there is proof of authorized deductions adding up to more than $10,000.
“Most of our clients are better off this year, but if they have children they have no choice but to do without the $4,050 dependent deduction,” said the owner of  the business. “People would probably be happier if they did not have to have adjustments to their withholding that make their refunds less, but overall most people have been happy.”
Some of the traditional tax return filing assistance for senior citizens in the region is no longer available. Carol Snider and another volunteer tax professional at the Warsaw Senior Center are busy five days a week helping Benton County residents who are 60 or more years old to file returns.  
“Some of these seniors used to go to State Fair Community College, and the Clinton Senior Center,” said Snider. “But, those locations are no longer open for tax assistance. I see about 10 people a day, plus some who don’t have an appointment leave their paperwork with me to check later. We need more volunteers!”
This is Snider’s tenth year to volunteer, without any stipend. If those assisted want to make a donation, it goes to the Senior Center. Snider said that she thought about working in her field for a company that could pay her, but decided to try volunteering at the Senior Center for a year. She ended up staying as long as she has because she doesn’t know what some seniors would do without volunteer help. She gave some advice to seniors who have to pay income tax instead of getting a refund.
“Some clients have to pay a lot each year because they don’t have taxes taken out of their retirement check,” said Snider. “If they had to pay this year and are over 60, they need to have some taxes taken out of their pension. One way to have enough taxes taken out is to mark “0” by “married” or “single” on the W-4 form. Then, the maximum amount of taxes will be withheld.”
 

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