As year-end approaches, everyone’s mind turns to either “What am I going to buy with that tax refund?” or “How am I going to pay what I owe?” Despite what you might hear in the media, the Tax Cut and Jobs Act has plenty for the “little guy.” What the media hasn’t warned you about is delays.
TCJA : Back to the Future
If history is any indication of what to expect this year, let’s take a look back to 1986. The Tax Cuts and Jobs Act (TCJA) is the first major tax reform in more than 30 years. The last tax legislative revamp, the Tax Reform Act of 1986, required the IRS to make changes to 162 existing forms, develop 48 new ones, and create 13 new publications. In addition, the IRS hired an additional 1,300 staff, increased phone capacity by 30 percent, and expanded hours and phone service to Saturdays to accommodate the 14 percent increase in call volume.
Implementing the TCJA is one of the IRS’s highest priorities. To insure successful implementation, many of the same procedures used in 1986 will be repeated. According to a Treasury Inspector General for Tax Administration report, the IRS will need $397 million to undertake all the activities to implement the legislation, which will include: reprogramming approximately 140 interrelated return processing systems; creating or revising approximately 450 tax forms, publications, and instructions; publishing guidance, notices and frequently asked questions (FAQ); preparing the agent workforce to help taxpayers understand the new law and how it applies to them; and providing taxpayer assistance and outreach.
So what should you expect? In a word: delays. Confusion may exist about reform implementation, massive reprogramming may result in inaccurate information, and don’t expect refunds to start flowing before mid- to late February — processing times will be longer.
There’s no doubt that taxpayers will enjoy a lower tax bill this year, but planning is still necessary. For starters, the standard deduction has doubled, eliminating itemized deductions for millions. You might also have noticed at various times throughout the year your paycheck has fluctuated because of tax table adjustments, essentially giving you your “refund” throughout the year.
Beware! If you anticipate a refund, it may not be as much as you expect. With accurate information and knowledge, many taxpayers will be able to come out on top this tax season. Make sure one of those is you! Start by contacting us today.