A surprise tax bill? [View all]

The 2017 tax overhaul made major changes to the code, such as limiting the deduction for state and local taxes and greatly expanding the tax credit for children under 17. The Treasury Department required employers and pension payers to lower withholding for 2018. This change allowed taxpayers to get the benefits of lower rates right away.

The problem here is that the broad-brush withholding changes don’t accurately reflect each individual’s situation. Some people who have counted on a large tax refund in the past to pay bills for holiday spending or big-ticket items will find they won’t get one.

After the changes, the Internal Revenue Service posted a calculator to help people fine-tune their withholding or estimated taxes. But only a few million filers have used it, and more than 150 million individual returns are expected for 2018.

The IRS recently warned that the number of filers who owe tax or penalties for 2018 is likely to be larger than in recent years, adding that “many of them are likely to be people who have always gotten refunds.”

https://www.wsj.com/articles/seven-new-years-tax-resolutions-for-2019-11545993002 (paid subscription)