AP Photo/Gillian Flaccus

Husband and wife Andy Kraft and Amy Elias, of Portland, Ore., talk during an interview about their 2018 tax paperwork in their Portland home on Monday, Feb. 18, 2019. The couple got a small refund last year but this year owe more than 0,000 in taxes under the new tax law. 

Wait, I owe the IRS?

The first tax filing season under the new federal tax law is proving to be surprising, confusing — and occasionally frightening — for some Americans, especially those accustomed to getting money back from the government.

Take Andy Kraft and Amy Elias of Portland, Oregon. The couple had grown comfortable getting a small refund each year, a few hundred dollars or more. Then they found out they owe $10,160 this year.

“I will never forget the moment, I thought ‘We look good’ and then we added in the next W-2 and my jaw hit the floor,” Kraft said. “There was no way I wanted to believe that what I was looking at was accurate.”

President Trump promised a reduction in taxes with the new law. And by most measures, the majority of Americans will see one. The nonpartisan Tax Policy Center projected the tax law would reduce individual income taxes by about $1,260 on average, although it benefits higher earners more.

So not everyone will see a massive tax bill or a drop in their refund. Some people already saw the benefit in the form of bigger paychecks. That’s because the law forced employers to change what they withheld. But the system is far from perfect, and many workers didn’t have enough in taxes set aside. Now, the IRS wants that money.

In addition, the law also eliminated personal exemptions, increased child credits, limited popular deductions and generally upended many familiar practices that determine what happens at tax time. That has taxpayers feeling a bit unmoored.

“We were very comfortable with our tax law, it had basically been there since 1986, suddenly all these things that were very important to people changed … it’s all different,” said Howard Gleckman, a senior fellow at the Tax Policy Center.

Kraft and Elias are able to pay their tax bill but he’s still stunned. He even tried to reverse-engineer things to figure out where they went wrong, diving into page after page of IRS rules. He painstakingly put together all the numbers. The couuple ultimately asked a CPA to verify the figures they were seeing on TurboTax. Crushingly, they were correct.

Their total tax was up slightly — by about $300 because of changes to their financial picture. Their effective tax rate was lower, but they still owed the government.

“I feel like I have reached a stage of grief of acceptance,” he said. “In a twisted way I should have been paying this all year and now I just have to pay it in one lump sum.”

“I will never forget the moment, I thought ‘We look good’ and then we added in the next W-2 and my jaw hit the floor,” Kraft said. “There was no way I wanted to believe that what I was looking at was accurate.”

President Trump promised a reduction in taxes with the new law. And by most measures, the majority of Americans will see one. The nonpartisan Tax Policy Center projected the tax law would reduce individual income taxes by about $1,260 on average, although it benefits higher earners more.

So not everyone will see a massive tax bill or a drop in their refund. Some people already saw the benefit in the form of bigger paychecks. That’s because the law forced employers to change what they withheld. But the system is far from perfect, and many workers didn’t have enough in taxes set aside. Now, the IRS wants that money.

In addition, the law also eliminated personal exemptions, increased child credits, limited popular deductions and generally upended many familiar practices that determine what happens at tax time. That has taxpayers feeling a bit unmoored.

“We were very comfortable with our tax law, it had basically been there since 1986, suddenly all these things that were very important to people changed … it’s all different,” said Howard Gleckman, a senior fellow at the Tax Policy Center.

Kraft and Elias are able to pay their tax bill but he’s still stunned. He even tried to reverse-engineer things to figure out where they went wrong, diving into page after page of IRS rules. He painstakingly put together all the numbers. The couple ultimately asked a CPA to verify the figures they were seeing on TurboTax. Crushingly, they were correct.

Their total tax was up slightly — by about $300 because of changes to their financial picture. Their effective tax rate was lower, but they still owed the government.

“I feel like I have reached a stage of grief of acceptance,” he said. “In a twisted way I should have been paying this all year and now I just have to pay it in one lump sum.”

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