Five things to watch on first Tax Day under Trump's law
This year’s tax-filing season has been one of the most closely watched in years.
The filing deadline is Monday in most states, and it’s the first time people are submitting returns that reflect many of the changes brought about by President TrumpDonald John TrumpOmar says she has faced increase in death threats since Trump tweet Trump rips into Pelosi after ‘puff piece’ ’60 Minutes’ interview Trump revived attacks on sanctuary cities to distract from Mueller report release: report MORE’s 2017 tax law.
The filing season for tax year 2018 began just days after the end of the longest government shutdown in U.S. history, when many IRS employees were furloughed or working without pay. That 35-day standoff raised concerns about the agency’s ability to process returns that had to take into account the biggest changes to the tax code since 1986.
Here are five things to watch on the due date for the first filing season under Trump’s tax law.
IRS data near the beginning of the filing season showed a noticeable decline in the average refund amount, prompting some Democrats to ramp up their warnings about the GOP tax-cut law.
But as time went on, agency figures showed that average refund amounts were similar to last year’s.
The most recent round of weekly figures, released Thursday, found the average refund through April 5 was $31, or 1.1 percent, smaller than amounts last year during a comparable period.
The share of processed tax returns with refunds through April 5 was 77.5 percent, compared to 78.3 percent at a similar point last year.
Tax preparers say whether someone gets a smaller or larger refund ultimately depends on their own personal situation, and that some people got bigger refunds than they expected and others who typically get refunds found they had a balance due to the IRS.
Experts have also stressed that most people are getting a tax cut for the first year under Trump’s law, and that cuts and refunds are two different things. Refunds reflect the amount that someone overpaid in taxes during the year, and in many cases people saw tax cuts in the form of bigger paychecks rather than a larger refund.
H&R Block released a report of data from its customers through March 31 and found that those who took the standard deduction for tax years 2017 and 2018 saw the largest increase in refunds this tax filing season. But for customers overall, refunds were roughly flat.
Refund data for this season could still change. The IRS said it expects about 153 million tax returns this year, and it had only received about 103 million returns through April 5.
Number of extensions requested
Many tax preparers say that more of their clients are requesting extensions this year.
In particular, owners of non-corporate businesses are seeking extensions. A new deduction was created for those business owners in the 2017 law.
For much of the filing season, which began Jan. 28, the IRS has received fewer returns than at similar weekly points last year. But the gap has narrowed recently.
Through April 5, the number of returns received is about 300,000, or 0.3 percent, less than it was at a similar point in 2018, the agency said.
How the IRS fared
The government shutdown that ended on Jan. 25 does not appear to have had a long-term impact on the processing of tax returns. The number of returns processed through April 5 was down 0.5 percent compared to a similar period last year.
And unlike last year, the IRS hasn’t had a major technology issue that impacted tax filing. A systems failure on the filing deadline in 2018 caused the IRS to extend the due date by one day.
The vast majority of taxpayers continue to file electronically. E-filing receipts through April 5 are up 1 percent, and the number of e-filing receipts for self-prepared returns are up 3.3 percent. The number of e-filings by tax professionals is down by 0.8 percent.
The IRS has a partnership with tax-prep companies that provide free tax-filing software to low-and middle-income taxpayers, but few taxpayers participate in the program, known as “Free File.” The House passed a bipartisan IRS reform bill on Tuesday that would codify the Free File program, but a number of progressives objected to the provision because they want the IRS to offer its own free, online filing service.
GOP, Democratic messaging
Trump is traveling to Minnesota on Monday to tout the tax law and the strength of the economy under his administration, according to a White House spokesperson.
The White House is also hosting an event this week on the Opportunity Zone provisions of the president’s tax law that give capital gains tax breaks to individuals and businesses that invest in economically distressed areas.
GOP lawmakers have also been touting the law’s tax cuts for the middle class and recent economic data.
Democrats, on the other hand, have been arguing that wealthy individuals and corporations are getting bigger tax cuts than the middle class under the law.
Liberal groups are planning to use Tax Day to urge the Treasury Department and IRS to comply with a request to provide House Democrats with six years of Trump’s tax returns.
Democratic presidential candidates have started to release their own tax returns during filing season. Sen. Bernie SandersBernard (Bernie) SandersTrump reelection campaign says it raised M in first quarter Democratic proposals to overhaul health care: A 2020 primer Gillibrand campaign links low fundraising to Al Franken backlash: memo MORE (I-Vt.) is expected to release his tax returns by Monday.
Filing season’s influence on public opinion
Polling related to Trump’s tax law has not been good for Republicans.
A Pew Research Center survey conducted from March 20-25 found that 36 percent of adults approve of the law, compared with 49 percent disapprove. Those results are similar to a January 2018 poll, shortly after the tax measure was signed into law by Trump in December 2017.
Few people think they paid less in taxes in 2018, according to several recent surveys, even though analysts across the political spectrum estimate that most people got a tax cut over the course of the year.
But there have been some bright spots for Republicans. For example, a New York Times/SurveyMonkey poll from early March found that half of respondents approved of the tax law, up from 45 percent in a September survey.