Jennifer and Paul Cellura planned to use their IRS refund to put up new fencing around their backyard in Huntington Station. And they were going to spend whatever was left on diapers and clothes for the new baby, due any day now.
But the $6,000 they usually get back turned into a $2,000 debt to Uncle Sam – all because they lost $25,000 in deductions under the new federal tax law.
“You add it all up, and it’s a perfect storm,” said Jennifer Cellura, 38, who is a physician's assistant. “It’s such a shame because they are hurting the middle class, the people that need it the most.”
Two weeks into filing season, Long Islanders are finding out exactly how the 600 changes in the tax code affect them. Some are getting cash back. Others are livid because their refunds are a sliver of what they expected. And then there are the ones who are stunned, even panicked, when they learn they owe the U.S. Treasury — in some cases, like the Celluras, thousands of dollars.
"It's not a cookie-cutter impact," said Anthony Basile, a certified public accountant and Hofstra University professor of accounting and taxation. "Everybody's situation is different."
The New Yorkers who are seeing red can split the blame between themselves and the government, financial experts said.
A good number have been whacked by the government's decision to eliminate or cap a dozen deductions, including a big one for high-tax states like New York — a new $10,000 ceiling on the deduction for state and local property and income taxes, the experts said.
The cap is such a sore spot that Gov. Andrew M. Cuomo traveled to Washington last week for a sit-down with President Donald Trump, who pushed for the tax overhaul during his first year in office.
But taxpayers have to take responsibility, too.
They have been getting more in their paychecks over the past year, but many didn't pay attention to the $30 or $40 in extra cash, said Alex Resnick, who heads the Nassau County chapter of the New York State Society of Certified Public Accountants.
What they have noticed, though, is their much smaller refund checks, said Resnick, who practices in Woodbury.
What they need to remember, he said, is that many of them really are paying less in taxes overall.
Of the 30 clients that Resnick has seen already, about 25 are getting less back than they did the year before.
"People are definitely getting sticker shock," he said.
The tax tales of two other filers, one from Westbury and the other from Melville, are far different. Both asked not to be identified.
The taxpayer from Melville is a 52-year-old father of two who runs a manufacturing and engineering company. He saw a $2,700 reduction in what he paid in federal taxes; his weekly take-home pay increased by $100, he said.
On the deduction side, he benefitted from the doubling of the child tax credit and the standard deduction, which for his family grew from $12,700 to 24,000.
The Westbury filer is a 73-year-old man who is a retired Verizon technician. He, too, was helped by the higher standard deduction and his state, local and property taxes came in under the $10,000 cap.
Both men are getting bigger refunds than last year, they said. For the Westbury man, $800 more. The Melville father is going from $12,000 to more than $14,000.
“No one is looking at the big picture,” the Melville filer said. “The refund doesn’t tell the whole story. It’s about the tax burden.”
More SALT, please
The number of returns filed is down by 10 percent from this point in the 2018 filing season, probably because of the 35-day government shutdown, the experts said.
So far, the Treasury Department has processed 26,965,000 returns; last year's figure was 30,016,000. And refunds are running 8.7 percent lower, the IRS reports. The average refund is $1,949 so far this year, down $186 from $2,135.
But when all is said and done, about 30 million taxpayers — one in five — may not get any refund and could end up writing a check to the IRS, the Government Accountability Office reports.
In late 2017, the president traveled across the country stumping for tax reform. He promised his plan, what became the Tax Cuts and Jobs Act, would give "a $4,000 pay raise" to the typical household.
The law reduced tax rates across the board and doubled the standard deduction for both individuals and couples, and the child tax credit.
But it was the elimination or capping of time-honored personal exemptions that opponents zeroed in on. For example, gone or limited are deductions for unreimbursed employee expenses, home equity loan interest, moving expenses, alimony, certain school donations, tax extenders and, of course, the state and local income and property taxes, or SALT.
For all the talk about SALT, it just might be the unreimbursed employee expenses that hit blue-collar workers such as plumbers and electricians.
"The union dues, uniforms and tools that they normally would deduct, they no longer can write off," Resnick said.
The downside of the deduction changes are crystal clear to the Celluras.
Jennifer Cellura , the physician's assistant, and her husband, Paul, who installs heating, ventilation and air-conditioning systems, earn about $150,000 a year. Their annual property taxes come in at about $14,000 so they lost a $4,000 deduction under the SALT cap. And they lost the $4,050 personal exemption for each of them and their 3-year-old — $12,150 in all — as well as their deduction for the interest on their student loans.
"We no longer can claim deductions for our child or high student loan interest and feel that the new federal tax laws actually seem to penalize people like ourselves for seeking overtime opportunities and trying to make a little more to make ends meet," Jennifer Cellura said.
Little extra in the paycheck
While all the noise is about deductions, the silent robber of refunds is employer withholding.
To give workers more in their paychecks, the government changed employer withholding tables so that less taxes came out.
“Most people are seeing the benefits of the tax cut in larger paychecks throughout the year, instead of tax refunds that are the result of people overpaying the government,” the Treasury Department said.
The problem: Very few employees noticed the cash. And many taxpayers who love big refunds didn't increase their withholding amount, the experts said.
"You could still owe more to the government," but still be paying less in taxes, said Charles Barragato, who is a tax partner at BDO USA in Melville. "That's because your withholdings may have changed."
George Kurth saw his weekly paycheck from the Fitzpatrick Hotel Group in Manhattan, where he is sales and marketing director, climb $72 because of the new withholding figures. He didn't understand what that bump would mean.
Kurth, of Holbrook, was counting on a hefty tax refund to pay for summer camp. So much for that idea: his refund stands at $3,500, down from $8,000 last year.
He didn't change his withholding amount.
"I shouldn't have had to," he said. "It's supposed to be a tax cut.
Now, Kurth is canceling a Disney family vacation with his wife and three kids. Summer camp is back on the schedule.
Despite the bigger paychecks, he said he did not see a tax decrease.
"You can make the case that we should have made ourselves more familiar with the changes," Kurth said, "but this was sold to us as a tax cut.”
Vincent Accardi, of Lake Grove, noticed that his take-home pay grew roughly $20 a week — but barely.
At 35, Accardi is assistant director of development at Stony Brook University’s College of Engineering and works part-time as a referee for a youth soccer league and an umpire for a youth baseball league. He is married, but he and his wife don't have kids.
This year, he couldn't write off his mileage to games and equipment expenses. The loss of the unreimbursed expenses deduction coupled with the SALT cap — the couple's property taxes are $8,000 — left him and his wife with a $2,750 tax bill. Last year, they got a $3,000 refund.
"I'll just have to dip into the savings," he said. "It’s really disheartening. It just feels like there is no middle class left on Long Island.
The decline in refunds could have put a dent in the Island's economy, said John Rizzo, chief economist for the Long Island Association, the region’s largest business organization.
Rizzo expects a drop in discretionary spending, from restaurants and hotels to vacations to home improvements.
“This could affect consumer confidence and persist in terms of residents cutting back on spending,” Rizzo said. “This is not great news.”
The Treasury Department is pushing back publicly on the refund gloom, reminding taxpayers who haven't filed that they should take a wait-and-see attitude.
“News reports on reduction in IRS filings & refunds are misleading,” the agency tweeted last week. “Refunds are consistent with 2017 levels and down slightly from 2018 based on a small initial sample from only a few days of data.”
Still, that's little consolation to the Long Islanders who aren't happy with how their returns came out.
Richard Baker, 63 and retired from the Town of Islip, is so disgusted that he is planning to move to Clearwater Beach, Florida, where he owns a second home.
The widower, who has two adult children, is reeling from the SALT cap. He pays $13,000 in property taxes and income tax from his part-time job as a public works consultant for Suffolk County.
The refund of $3,000 to $5,000 of years past evaporated. He owes the IRS more than $1,800, he said.
“It’s getting tougher and tougher to own a home and live on Long Island,” Baker said. “There’s no incentive to own a home here.”