How The “#TaxScam” Hurts Lower, Middle Class People

BY: Nina Joung

A recent change in tax refund policy has derailed many taxpayers’ financial plans — and they have been anything but quiet about it. Confused and angry after receiving their tax refund, many people headed to Twitter to vent their frustrations through hashtags like #TaxScamStories (scroll down to see some of the testimonial tweets)

A change in tax returns is especially devastating to low-income people who rely on tax refunds as their biggest cash infusion of the year. According to a survey from GoBankingRates, 27% of participants use their tax refund to pay off debt and 9% put their refund towards a savings account.

As people around the country are taking a hard look at their finances, let’s look at the policy behind the tax “surprise” and the impact it’s had on low-and-middle-class Americans.

This is your News Roundup on this year’s tax refunds.

1) Trump’s ‘tax scam’: Some taxpayers get unwelcome surprise after filing returns | Yahoo! Finance

Thanks to the Tax Cuts and Jobs Act (TCJA), many people who’ve experienced no change in their income now see a change in their tax refund. However, there’s a reason why Yahoo! Finance puts the term “tax scam” in quotes: some taxpayers may not have realized that TCJA changed the withholding amounts on their paychecks.

This means people were getting a bigger paycheck which could have affected their refund status. Most people may not have noticed the slight increase in their paycheck, but are now paying for the oversight.

2) Smaller Tax Refunds Surprise Those Expecting More Relief | The New York Times

However, even understanding the policy behind the change didn’t properly prepare some for their tax refund — or lack thereof. As Tara Siegel Bernard reports for the Times: one woman, Ashley Alt, who works in information technology in Illinois, expected to owe some money to the IRS, but the $4,800 bill she received was beyond her imagination:

“I was expecting to get less of a refund or maybe owe a little bit,” she said. “I did not expect to owe two months of take-home pay.”

Now, families who were expecting a cushion from this year’s tax refund are now scrambling to find a way to pay off their new-found debt.

3) For Low-Income Americans, the IRS Is Always Shut Down | Talk Poverty

The government shutdown got a lot of people nervous about tax season, but for low-income people, they have to deal with inefficiencies of the IRS regularly. For the tens of millions of people who don’t have internet access, only four out of ten taxpayers successfully reached a live assistant over the phone.

Additionally, for the 108 million low-income people who are eligible for free in-person tax prep, only 3% of them successfully had their taxes through these programs.

4) How do your tax dollars get spent? | Two Cents PBS

There’s a lot of talk about what taxes get returned to you, but what about the taxes that go to Washington? PBS Digital Studio’s Two Cents breaks down federal taxes down to the nickels and pennies.

Their “two cents:”

“It would be hard to find one of these expenses that doesn’t touch your life or the lives of someone you love.”

How Do Your Tax Dollars Get Spent?

Remember when you received your first paycheck at your first job and the amount was a little lower than expected? Surprise! Some of that money was already spent for you. Have you ever stopped to figure out exactly WHAT is being bought with all that money you send to Washington each year?

Posted by Two Cents • PBS on Monday, March 19, 2018

Tax returns has some people stunned and others wanting to educate, but we can always count on twitter to provide some comic relief, as well.

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