House Democratic tax writers have asked the IRS and Treasury for an update on lower refunds expected during the 2019 tax filing season. However, the chair of the Senate Finance Committee (SFC) is urging taxpayers to disregard “misinformation” on 2019 tax filing season refunds.
Democrats’ TCJA Criticism
Following the enactment of the Tax Cuts and Jobs Act (TCJA) (P.L. 115-97), Treasury and the IRS released updated federal tax withholding tables in 2018. House Ways and Means Oversight Subcommittee Chairman John Lewis, D-Ga., and member Judy Chu, D-Calif., have expressed concerns that as a “result” of the TCJA, millions of taxpayers underpaid taxes in 2018 while relying on these tables and are expected to receive a lower refund this year than anticipated.
“As you know, when Treasury and the IRS released these tax withholding tables in 2018, the tables did not fully factor in the TCJA’s reduction in itemized deductions and the TCJA’s removal of personal exemptions,” Lewis and Chu wrote in a letter sent earlier this week to IRS Commissioner Charles Rettig and Treasury Secretary Steven Mnuchin. Accordingly, many taxpayers are expected to have underpaid federal taxes during the 2018 tax year.
Lewis and Chu requested the following information from the IRS and Treasury by February 26:
- Adjustments made to more efficiently incorporate the TCJA into 2019 withholding calculations;
- Additional IRS guidance to address “underwithholding” in 2018; and
- Additional IRS guidance to address “lower-than-expected” refunds.
Additionally, Lewis and Chu requested that the IRS lower the underpayment penalty threshold to 80 percent. The IRS has already lowered the ordinarily 90 percent threshold to 85 percent, but several lawmakers and tax practitioners have requested further penalty relief.
Likewise, SFC ranking member Ron Wyden, D-Ore., has criticized the TCJA for resulting in underpayment of taxes during the 2018 tax year. However, SFC Chairman Chuck Grassley, R-Iowa, is urging taxpayers not to believe the “myths and misinformation” surrounding refunds received this filing season.
“No withholding table will ever be perfect. If they were, there would be no need for tax refunds,” Grassley said from the Senate floor on February 13. “The size of one’s refund tells you nothing about whether a specific taxpayer benefitted under the TCJA or not,” he added.
Grassley encouraged taxpayers to understand that the best way to see how tax reform affected their “bottom-line” is to compare this year’s and last year’s tax returns, rather than the amount a refund. “The size of a refund tells you nothing beyond the degree to which a taxpayer has overpaid their taxes over the course of the year.”
By Jessica Jeane, Senior News Editor