Manuel DaRosa, CPA
Accounting and Tax firm with offices in Taunton and Mansfield, MA

Many taxpayers are unaware of the tax-filing deadline this year, as well as of the amount of taxes being withheld from their paychecks and some of the key provisions of the recent tax law, according to a new survey. Other surveys released this week revealed uncertainty about the new tax law.

One survey released Thursday by Betterment, an online financial advisor, polled a sampling of 1,000 people online and found that 85 percent of respondents reported feeling somewhat confident in their knowledge of taxes. However, when asked about specific tax matters, 23 percent of the respondents didn’t know the correct tax filing deadline for this year was April 15, 48 percent didn’t know tax rates for tax brackets decreased from last year, and 50 percent didn’t know how much was withheld from their paycheck for taxes

The survey also asked about consumers’ plans for this tax season, and found that 41 percent of the respondents plan to use tax refunds to pay off debt, but only 6 percent of them said they would use it to save for retirement. As a result of the Tax Cut and Jobs Act of 2017, 18 percent of respondents said they have increased their 401(k) contributions, while 10 percent have increased their IRA contributions. In the aftermath of the government shutdown, one-third of the taxpayers polled said they plan to file earlier than usual because of concerns about delays on their tax refunds. The survey found that 41 percent of the respondents plan to use at least some of their tax refunds to pay off debts, such as medical bills, car payments and credit card balances.

More Republicans than Democrats indicated they believe the majority of tax dollars aren’t spent wisely. When asked where they think the bulk of federal tax dollars go, the top response across all political affiliations was “bureaucracy and waste,” but Republicans were more likely to cite that response than Democrats.

Taxes seem to be an almost universal source of dread and it’s clear that the news cycle this past year has brought additional stress and confusion to the equation.

Enrolled Agents

A separate survey of tax professionals bears this out. The National Association of Enrolled Agents released a report Tuesday on the results of an online survey of 924 of its members. The enrolled agents polled mostly think taxpayers are unprepared for the current filing season. They believe more consumers will find tax preparation more challenging this year due to the Tax Cuts and Jobs Act and will seek the services of tax professionals.

The poll found 91 percent of the enrolled agents surveyed strongly agree that taxpayers are baffled by the TCJA and are unprepared to file. It’s not just the new tax law confusing taxpayers. Many businesses are also unprepared to deal with the Supreme Court’s Wayfair decision on online sales taxes. An overwhelming 86 percent of the NAEA membership believe that small businesses are unprepared to deal with the Supreme Court’s decision in South Dakota vs. Wayfair Inc. et al. When combined with tax reform uncertainty, 59 percent of the survey respondents believe there’s a perfect storm of doubt that will drive more taxpayers to their firms.

Despite the importance of paying attention to tax withholding in the wake of the new tax law, the survey found 90 percent of enrolled agents strongly agreed that taxpayers pay little or no attention to planning their annual withholding amounts. Many taxpayers found this tax season they unexpectedly owed money to the IRS, or they received a much lower tax refund than expected, because of the changes in the new tax law and the withholding tables.

When asked which documents taxpayers were least likely to remember to provide to a tax professional, the enrolled agents surveyed identified the Schedule K-1, Form 1095-A, Form 1099, Form 1099-S, 1099-R, and proof of health insurance as the most probable.

Swim with Sharks or File Taxes?

Another survey shows a combination of optimism and pessimism about the new tax law and taxes in general. It found that fewer than four out of 10 people are happy with the tax changes from the Tax Cuts and Jobs Act, with 70 percent indicating they think the reforms benefit the rich more than the middle class. Similar to the Betterment survey, 89 percent of the respondents said the government currently does not spend their tax dollars wisely.

When asked about Tax Day fears, and 31 percent of the respondents said making a math mistake was their biggest Tax Day fear, edging out not having enough money (28 percent) at the top of the list. When asked what they would do to have a “tax-free future,” 36 percent of the respondents said they would move to a different country, 24 percent would get an “IRS” tattoo, 15 percent would take a vow of celibacy, 11 percent would name their child “Taxes,” and 2 percent would clean prison toilets for three years.

According to a recent survey, nearly 50 percent of people would rather serve jury duty than file their taxes, 25 percent would miss a connecting flight, 21 percent would rather talk to their kids about sex, 13 percent would prefer to swim with sharks, 11 percent would spend the night in jail, and 11 percent would drink expired milk.

 When asked what they like more than the IRS, 42 percent said in-laws, 21 percent said snakes and spiders, 20 percent said cold showers, and 17 percent said traffic jams.

Tax Alerts
Tax Briefing(s)

Final regulations relating to the low-income housing tax credit revise and clarify requirements that low-income housing agencies must follow when conducting physical inspections of low-income units and reviewing low-income certifications and other documentation. The regulations finalize previously issued temporary regulations (T.D. 9753, February 25, 2016).

The Senate’s top Democratic tax writer is calling on the IRS and Treasury to further waive underpayment penalties for the 2018 tax year. Nearly 30 million taxpayers are expected to have underpaid taxes last year, according to the Government Accountability Office (GAO).

Senators have introduced a bipartisan bill specifically tailored to reduce excise taxes and regulations for the U.S. craft beverage industry. The bill aims to promote job creation and permanently reduce certain taxes and compliance burdens.

The IRS’s proposed 50-percent gross income locational rule on the active conduct of Opportunity Zone businesses is garnering criticism from stakeholders and lawmakers alike. The IRS released proposed regulations, NPRM REG-115420-18, for tax reform’s Opportunity Zone program last October.

The IRS has said that it is postponing its plan to discontinue faxing taxpayer transcripts. The IRS statement came on the heels of a letter sent earlier this week from bipartisan leaders of the Senate Finance Committee urging such a delay.