More Americans may owe the IRS next tax season

By Personal FinanceFOXBusiness

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Some taxpayers may owe the IRS more than they expect next April, after changes were made to individuals’ tax liabilities via the Tax Cuts and Jobs Act last year.

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According to a simulation conducted by the Government Accountability Office (GAO), which reviewed the revised federal tax withholding tables for 2018 implemented by the IRS and the Treasury Department, 21% of workers are at risk of having their taxes underwithheld – 3 million more than projections based on the old tax code. These taxpayers will owe the IRS money at the end of the year.

Only 6% of taxpayers are expected to have wages accurately withheld, while 73% are likely to have their taxes overwithheld. The former is three percentage points less than a simulation conducted using the same withholding structure and the old tax code. Accurate withholding was assumed to be within $100 of what is truly owed.

This year, employers are using W-4 forms already on file to calculate withholding amounts, which has posed problems for taxpayers because the sweeping tax reform changes address everything from personal exemptions to the standard deduction. The Tax Cuts and Jobs Act gave the Treasury Department authority to determine the withholding allowance structure because the old method was no longer suitable, and there was not enough time to issue a new W-4.

When asked in February about how many errors Treasury has seen so far this year, Treasury Secretary Steven Mnuchin declined to comment directly, pointing taxpayers to the IRS withholding calculator.

Employees can update their withholding amounts and the administration has encouraged them to use the tax calculator, available on the IRS website. They can also consult a financial adviser.

The Trump administration released a proposal for the new 1040 tax document, or the U.S. individual income tax return, in June. It is expected to release a new W-4 form later this year.