NEW YORK, March 14, 2019 — Americans are faced with the implications of several changes this tax season. It will be the first filing season under the new federal tax law, which ushered in the most significant set of changes to the U.S. tax code in thirty years. According to a recent survey from Betterment, the largest independent online financial advisor, confusion abounds, and many taxpayers also face uncertainty around their tax situation as a result of the December 2018 – January 2019 government shutdown.
Betterment’s Consumer Perspectives Report: Tax Season polled 1,000 consumers to get a better understanding of their attitudes and readiness as they head into the 2019 tax season. The survey revealed themes across four main topics: the impact of the government shutdown, tax knowledge, plans for tax refunds and taxpayer sentiment.
Here’s what we learned:
- Americans are still in the dark on key changes to tax laws: Eighty-five percent of respondents reported feeling somewhat confident in their knowledge of taxes, but when tested on this tax knowledge most were not as tax-savvy as they believed.
- Almost a quarter of respondents (23%) did not know the correct tax filing deadline was April 15, and the majority of those were millennials.
- 48% did not know that tax rates for tax brackets decreased from last year.
- 50% don’t know how much is withheld from their paycheck for taxes.
- Tax refunds are mostly being used to pay off debt: Despite promising reports on the economy and lower unemployment rates, the majority of American consumers still struggle with debt. The survey found that almost half of respondents (41%) plan to use at least some of their tax refunds to pay off debt, including healthcare bills, car payments or credit cards.
- More Republicans think the majority of tax dollars aren’t spent wisely: Respondents were asked where they think the bulk of federal tax dollars go. Across all political affiliations, the top response was “bureaucracy and waste,” however, Republicans were more likely to think so than Democrats.
- The government shutdown has taxpayers worried: As a result of the government shutdown, nearly a third plan to file taxes earlier than normal. Three-quarters of those early filers worry there will be delays on getting refunds.
“Taxes seem to be an almost universal source of dread and it’s clear that the news cycle this past year has brought additional stress and confusion to the equation,” said Eric Bronnenkant, Head of Tax at Betterment. “Our goal at Betterment is to help people make smarter choices and make the most of their money. That’s why we stress the importance of consumers understanding tax basics and taking advantage of investment strategies that work for them rather than against them, so they can continue to prioritize smart saving and investing for the long haul.”
Read or download the full Report: Consumer Perspectives Report: Tax Season.
The survey gathered online responses from 1,000 respondents over the course of February 4-7, 2019. Respondents were at least 18 years old, employed either full time or part time, planned to file taxes in 2019 and at least partially involved in the filing of taxes. The sample was provided by Market Cube, a research panel company. Panel respondents were invited to take the survey via an email invitation and incentivized to participate via the panel’s established points program.
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Betterment is the largest independent online financial advisor with more than $16 billion in assets under management. The service is designed to help increase customers’ long-term returns and lower taxes for retirement planning, building wealth, and other financial goals. Betterment takes advanced investment strategies and uses technology to deliver them to more than 400,000 customers across its three business lines: direct-to-consumer, Betterment for Advisors, and Betterment for Business. Learn more.
Investing in securities involves risks, and there is always the potential of losing money when you invest in securities. Determination of largest independent robo-advisor reflects Betterment LLC’s distinction of having highest number of assets under management, based on Betterment’s review of assets self-reported in the SEC’s Form ADV, across Betterment’s survey of independent robo-advisor investing services as of August 20, 2018. As used here, “independent” means that a robo-advisor has no affiliation with the financial products it recommends to its clients. If you also have a 401(k) account through Betterment For Business, that account is subject to a separate fee schedule and is not included in your balance for determining eligibility for the fee tiers or subject to the fee cap mentioned above.