Many Americans are freaking out about getting a smaller tax refund this year — here's why it's happening

February 19, 2019 at 11:51 AM EST

Alex Edelman/Getty Images

Tax Day 2019, the last day to file your 2018 tax return, is Monday, April 15.
According to IRS data, the average federal tax refund amount is down 8.7% from last year, to $1,949.
The smaller refunds are drawing the ire of many Americans, including prominent Democrats, who are blaming the tax law enacted by President Donald Trump in 2017.
While many Americans who use tax refunds as a savings vehicle are disappointed, a refund is not indicative of a person's tax bill, but rather of the amount withheld from their paycheck.
Middle-class Americans, on average, saw their taxes go down for the 2018 tax year.

Many Americans are especially frustrated this tax season, the first under President Donald Trump's new tax law.

According to IRS data, the average federal tax refund amount is down 8.7% — to $1,949 — for the second week of the 2019 filing season compared to the same window last year. The total number of refunds issued dropped by about 15%.

Taxpayers who e-file and request direct deposit should see their refund hit their bank account within 21 days of submitting their return. Many aren't happy with the size of their refund this year, and some even owe money to the IRS.

Tweet Embed:
//twitter.com/mims/statuses/1096792163155918848?ref_src=twsrc%5Etfw
Tax refund a thousand dollars lower pic.twitter.com/nBsGGvnbkl

Tweet Embed:
//twitter.com/mims/statuses/1096429853195288576?ref_src=twsrc%5Etfw
My federal tax refund was HALF of what it was last year, and for the first time in my life I actually owe money to the state. I work 2 jobs and barely afford my bills, but I’m really glad billionaires are getting breaks on their taxes this year. MAGA!

Tweet Embed:
//twitter.com/mims/statuses/1097635929320247298?ref_src=twsrc%5Etfw
Me, policy journalist: tax refunds are a sign of the system not working; people shouldn’t give no-interest loans to the government, they should have their money early!

Me, doing my taxes this year: what do you mean I “owe money” how dare you A lot of the anger about smaller tax refunds is directed at Trump and the GOP: Tweet Embed: //twitter.com/mims/statuses/1096477910221971456?ref_src=twsrc%5Etfw Hey @realDonaldTrump my wife and I usually receive a nice tax refund every year. I have over $2,200 in student loan interest and $5,200 into our mortgage. Now we owe $375. Please RT if you have a similar story. #FakePresident #TaxScamStories

Tweet Embed:
//twitter.com/mims/statuses/1096824471388856320?ref_src=twsrc%5Etfw
Despite claiming zero dependents and withholding an additional $50 a paycheck we just got hit with a $4000 tax bill when we normally get a $2000 refund. All this while paying mortgages and putting two kids through college. This is an assault on the middle class #GOPTaxScam

Tweet Embed:
//twitter.com/mims/statuses/1097183415563104257?ref_src=twsrc%5Etfw
We count on our tax refund ($2500-3000) to help us catch up on back bills and to take a family camping trip (where we splurge on a cheap cabin). This year, we OWE about $200. WTF??? This ain't what I voted for #GOPTaxSCAMStories #MAGA

While many Americans rely on the windfall from a tax refund, financial experts say a larger or smaller refund is not indicative of whether a person paid more or less in taxes, but rather of the amount withheld from their paycheck.

"Some individuals like receiving a larger refund because they use it as a savings account," Mark Jaeger, the director of tax development at TaxAct, told Business Insider. "It's a way for them to save a significant chunk of money throughout the year. For some, that's a perfectly fine strategy, as long as you can cover all of your other expenses throughout the year."

A bonus just for you: Click here to claim 30 days of access to Business Insider PRIME

Big tax refunds generally mean you paid too much in taxes — you had too much income tax taken out of each paycheck, and now the IRS is returning what is rightfully yours. Instead of keeping your money in a savings or retirement account where it could earn interest all year, you essentially gave an interest-free loan to the government, Business Insider previously reported.

Further, receiving a smaller refund, or owing money to the IRS, doesn't necessarily mean you had a higher tax bill this year than before the new tax law was enacted, Business Insider's Bob Bryan explained. In fact, middle-class Americans, on average, saw their taxes go down for the 2018 tax year.

The tax law instituted new guidelines for how much employers should withhold from employees' paychecks for taxes, resulting in an increase in take-home pay for about 90% of Americans beginning in February 2018.

Employees who didn't adjust their withholdings after the new guidelines were released could be receiving a smaller refund than they expected this year, Jaeger said.

"Just because you receive a small refund doesn't mean you didn't get everything back you were owed or that you're worse off financially — it most likely means you paid the right amount of federal taxes you owed during the year and didn't overpay," Jaeger said.

According to a January article in The New York Times, a Treasury Department analysis provided to the Government Accountability Office estimated that compared with last year, about 4 million fewer filers would receive refunds this year, while about 4 million more filers would have a balance to pay on their taxes because of the new withholding system.

NOW WATCH: Amazon will pay $0 in federal taxes this year — here's how the $793 billion company gets away with it

See Also: