Filing our taxes was difficult enough, now we have to figure out the new law.
It doesn’t matter who supports it now – tax laws have changed, it’s time to file and most Americans don’t know what to do.
Over three quarters (77 percent) of Americans find the new tax law confusing and over a third (36 percent) know they won’t benefit from it, says a study from Tax Audit.
“This is the most dramatic remodeling of tax legislation we’ve seen in 30 years,” says Mark Olander, CEO of TaxAudit. “Unfortunately, we expect the new tax law to further increase stress levels and confusion as taxpayers try to understand the impact on their returns.”
Chaos under the new tax law
Tax Audit surveyed more than 2,500 Americans. Aside from finding the new tax law confusing, most don’t know how it will earn them more money. Almost half (42 percent) are unsure of the benefits, and 21 percent believe they’re going to pay more in taxes under the new law.
Of course, confusion over tax filing isn’t new. Just three years ago, Americans scored an F on basic tax knowledge, says a 2015 study from NerdWallet. But, Americans are more confused this year than previous years, says another study from NerdWallet.
Most Americans (74 percent) know something is changing in their taxes, but they don’t know what that something is. Almost half (48 percent) don’t know what their income bracket is this year, compared to 40 percent last year.
Over a quarter (26 percent) don’t know the Republican tax bill was signed into law at the end of last year. Half (49 percent) know their income tax will change, but not how (50 percent). Americans have at least another year to figure out how this will change their income brackets, because it won’t take effect until we file in 2019. But they really should get on it.
“Knowing your bracket can help you determine the value of any deductions you take and whether a tax-advantaged investment is worthwhile,” says Liz Weston, NerdWallet columnist and certified financial planner. “When you pay a dollar in mortgage interest, for example, your bracket determines whether you can save 10 cents or 39.6 cents.”
Americans should note there are still seven income tax brackets – but the ranges of each have been adjusted. The standard deduction, or the dollar amount of income you’re taxed, has nearly doubled, according to Business Insider. And the personal exemption, or an amount of money you can deduct for yourself or your dependents, has been removed.
The less we know, the more likely we are to get audited.
The odds of a tax audit
Most Americans (89 percent) would be worried to find out they made a mistake filing their tax return, while a third (28 percent) say a tax audit is their biggest concern and 21 percent worry they’ll need to pay more after they’ve filed, according to NerdWallet.
Tax audits occur when the IRS notices something strange in a return. It’ll review the return closer to determine the accuracy of the income and deductibles. This new law is just adding to our fear of an audit, says Tax Audit’s survey.
- 47 percent: feel anxious when they receive notice from the IRS
- 46 percent: can’t tell the difference between an IRS notification and audit letter
- 32 percent: don’t know what to do if they are audited
- 29 percent: worry they’ll be audited
Most Americans are ignorant to how the IRS can audit tax returns. Less than a quarter (24 percent) know the IRS can audit tax returns up to three years. Many Americans are probably in the dark to the details of a tax audit, because the IRS isn’t transparent of what it considers to be an audit.
“Unfortunately, the IRS’s narrow definition of what an audit is creates a false sense of security,” Olander says.
One fourth of Americans have received some kind of notice from the IRS, but only 11 percent have previously been audited – which could lead to unnecessary stress.
“Although the IRS claims that the audit rate is around one percent, many of the other types of correspondence from the agency incite the same level of anxiety and should be included in the official audit rates that they release to the public,” Olander says. “The IRS’s own statistics show that more than six percent of taxpayers receive some type of correspondence inquiring about the entries on their tax returns each year.”
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Article last modified on March 23, 2018 Published by Debt.com, LLC . Mobile users may also access the AMP Version: Tax Filing Just Got a Little More Complicated - AMP.