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Significant changes to tax law took effect in 2018. I heard some interesting comments from clients. Some didn’t believe taxes went down because their refunds didn’t increase. To be fair, taxes did go down for most people, but so did tax withholding from paychecks, keeping many refunds level with prior years. I guess people didn’t notice the extra take home pay.
The other thing I sometimes heard was that they thought their tax return would fit on a single piece of paper. That one made me chuckle because all of the lines eliminated from Form 1040 found their way onto a handful of new schedules, making for more pages than ever.
What might preparers hear and see this year?
Of course there are the recurring questions we hear every year.
1. “I’m filing as head of household,” a client told me.
You can’t be head of household,” I explained. “You don’t have any dependents”.
“Yeah, but I’m still the head of my household.”
2. Why does my friend get a bigger refund than me? We have no idea why, and if we did, we are not allowed to tell you.
3. That income doesn’t have to be on my return, they already taxed me on that! We often hear this one when a worker takes an early withdrawal from a 401K and has tax withheld, or when a casino withholds taxes on a jackpot.
Feel free to add to the list.
I’m an AARP tax preparer. I fully expect to spend a lot of time explaining why people are paying tax on Social Security. This was a promise made by Trump that was not delivered. There was a fair amount of discussion during the 2024 return season and I advised my clients to not count their chickens.
It would be easier to be a brain surgeon than to be a tax preparer. Fortunately AI will make both jobs obsolete.
Perhaps I’ll give brain surgery a try before AI takes over. Who wants to be my first victim….. I mean patient?
Well, if you can find the brain connection that stops me from running on with my mouth, Suzie will definitely give you permission 😉
Mark, I can think of a few people I’d love to experiment on, you nor any other HDers are among them. Suzie would not want me faffing about up there; I would only make things worse.
Being childless, I never got to file as head of household until my MIL and SIL came to live with us. Now, pushing 70, I finally have dependents.
You know what? It feels great.
I decided this year I’ll give the IRS more, rather than them saying I short-changed them. Grandkids can be the same way, but for different reasons.
I heard those, too in my 40 years as a CPA; many had their refunds spent before coming in!
It will be interesting to see what happens, Dan. I have read that some people may get larger refunds in 2026 b/c the new withholding won’t be changed until then to reflect what is in the OBBB. (Like for tips and OT). I saw the Dinkytown calculator had been updated recently, and we will pay less than I had thought. I am going to wait until we do our taxes to see how much I need to adjust. Chris
I went ahead and canceled my last two estimates; I don’t like big refunds.
It sounds like you have decided to utilize the OBBBA senior deductions to go small on taxable income in 2025. I have yet to decide if we will go small in 2025 or do some Roth conversions to eat up our already paid in FWT or just get a larger refund than I had originally planned for.
Our current year taxable income is in the “tax torpedo” range so every dollar change of taxable income causes a $0.85 change in taxable our social security income.
My typical goal is to be dead even on taxes each year but I may break with my tradition in 2025.
I would be in the same situation as you. To Roth or not to Roth is more of a quandary when the conversion will affect your tax on Social Security. If volatility delivers a correction before the end of the year, I might lean towards the conversion even if it did cause more tax on SS.
Good stuff Dan. Informative and entertaining.
I bet you hear “why should I pay taxes, I paid my dues” or taxes are a scam, “they” are ripping me off. “They” never defined.
I don’t think most Americans make the connection between paying taxes and what they receive in return. And they sure don’t understand Americans are not highly taxed when compared with many other countries.
The reality is we need higher taxes and less new spending unfunded. The lack of a basic understanding of taxes and governments is sad in my opinion.
I think you’re correct, but I pity the politician who tries telling the truth about taxes.
I also wonder exactly who “they” are.
I don’t do taxes for others, but these are the kinds of topics I’ve read about through the years:
I shouldn’t owe money this year because I don’t have any leftover
Why can’t I claim my veterinary bills as a medical deduction?
I want to itemize AND take the standard deduction
Why do I need to supply proof for that deduction?
How do you know the IRS won’t accept that as a deduction (or credit)? Shouldn’t we just submit it and see if it works?
>>> and finally, a quote from my ex-wife, after seeing our tax return and seeing (separately) the balances on my 401(k) and her IRA: “Can we spend that?”
So many don’t understand why they owe tax on investment income saying “but I never received any money from the account”.
When married filing separately, people often want to take the standard deduction on one return, and itemize on the other. That is of course a no-no. And yes, many think you can piggyback both the standard and itemized deductions.
One friend of mine is retired with an okay pension, and a couple hundred thousand dollars in an IRA. Like your X, his wife wanted to spend it. I explained to her that his fixed pension would lose buying power due to inflation, and that she, like her mom, may live into her 90s. Also, she would lose some SS income if her spouse croaked first, so she would eventually need that IRA money to get by.