Tax Day is fast approaching, and a local expert says many people are running into hiccups while adjusting to filing their taxes under the new Tax Cuts and Jobs Act, which was signed into law in December 2017.
"This has been the hardest season since 1987, when we had to deal with the 1986 Tax Reform Act," said Barry Sattell, a partner at WIPFLi.
"We're still getting guidance from the IRS as to how to report some of the more exotic investments people are involved with," he added.
Sattell said the 2017 Tax Cuts and Jobs Act resulted in most Americans keeping more money from each of their paychecks.
But he noted that also means people could see smaller refunds — or even no refunds.
"People that got big refunds are getting smaller refunds. People used to getting smaller refunds are actually owing taxes," Sattell said. "They have to remember the withholding tables changed during the year, so people should've seen a little more, every two weeks, in their paychecks."
But when it comes time to file, people don't remember. "They only see that their refund isn't as big as last year," he added.
Sattell said anyone who isn't able to pay their taxes by April 15 should apply for an automatic, six-month extension.
"People that got big refunds are getting smaller refunds. People used to getting smaller refunds are actually owing taxes." — Barry Sattell, partner at WIPFLi
Even if the extension is granted and you don't have to file in April, Sattell recommends paying at least 90% of the initial amount owed because he said delaying payment will mean you get charged interest and possibly late fees. The cost could climb as high as 25% of the taxes due.
"It's a lot like credit card debt," Sattell said. "If you don't pay it off, you start getting interest, and if you're only making the minimum payment, you're never getting out of the hole. It'll eat up your life savings."
He noted the interest rate on unpaid state taxes is typically higher than the rate on unpaid federal taxes.