This Tax Season May Bring Surprises
If you're counting on a tax refund this spring, an upset could be coming your way.
The new federal W-4 form introduced in 2019 makes major changes.
It's intended to minimize refunds and withholdings to accurately reflect tax liabilities.
In other words, slightly bigger paychecks last year may come at the expense of a smaller refund this spring.
"A lot of people should consider changing their withholdings in 2021 if they're not seeing the refund they expected," said Jaime Koeppel who is a Master Tax advisor.
But other options are available this year. Individuals can use their pre-pandemic earning to better represent their tax contribution
"A new year for 2020 where we can use 2019's earned income if it was higher than 2020's to calculate earned income credit," said Koeppel.
The second big item that could surprise people is unemployment benefits they may have received.
While the coronavirus stimulus payments were tax-free, the enhanced unemployment benefits were not.
That means many taxpayers are liable for taxes on those benefits now.
It could eat up most of the refund they might have otherwise expected and, combined with lower withholdings per the new W-4 form, more people may have to send checks to the government in April.
The new elements of filing applicable to many require extra time and resources, so tax advisors recommend getting outside help.
The filing period is ongoing, and ends April 15th.
Tax advisors say although the due date was extended last year, don't count on it being extended again this year.