When the Tax Cuts and Jobs Act was introduced late in 2017, the president called it “one of the great Christmas gifts” for the middle class, and said it was an “historic victory for the American people.”

Six months after the tax package passed, he said, “Your paychecks are going way up. Your taxes are going way down.”

Now that we’re in the midst of tax season, taxpayers aren’t so sure.

We spoke to five New Jersey tax preparers to see what changed for their clients’ tax burdens under the new law.

Everyone agreed the changes to withholding brought ugly surprises for lots of taxpayers - in case you missed it, we addressed that issue here - but there were some other unexpected results, too.

Here’s what our CPAs had to say.

Owing more this year

Gail Rosen is a Martinsville-based certified public accountant.

She said many of her clients were in for a jolt when they saw their returns.

“Our clients owed more this year than ever in the past,” Rosen said. “That is not necessarily due to a tax increase but because they had lower withholding on their income.”

She said most of her clients didn’t even realize they were getting an increased net paycheck with less federal withholding.

The clients who fared the worst were generally high-income clients, she said. That’s because the loss of the full SALT deduction affected them the most.

SALT stands for state and local taxes, and includes property taxes. Under the new tax plan, the SALT deduction is limited to $10,000, a big hit for New Jerseyans who have higher property tax bills. (You can deduct SALT worth $15,000 on your New Jersey return.)

Rosen shared the story of one married couple with combined wages of $1.7 million. Their property tax for two homes was $57,000 - lower than usual because they prepaid their 2017 property taxes.

“They owed $100,000 due to loss of the SALT deduction and due to lower withholding and other changes in their taxes,” Rosen said. “They ended up with the $24,000 standard deduction versus $164,000 itemized last year.”

So of Rosen’s clients, who fared the best? Clients who could take the new 20 percent business income deduction, those with children who could take the new $2,000 child credit, and those who were married, because married tax rates decreased more than rates for other taxpayers, she said.

Looking ahead, Rosen said, she is telling every negatively affected client to increase withholding to avoid penalties next year.

She said she’s also looking at techniques to increase tax benefits from charitable giving, such as paying a charity directly from IRA distributions and setting up charitable trusts.

Read this story to learn more about what’s changed for charitable giving and how you can plan accordingly.

Withholding was the key

Howard Hook is a certified financial planner and certified public accountant with EKS Associates in Princeton.

Withholding was the key, he said.

“Overall I have seen lower refunds and larger amounts owed,” Hook said.

He said when the new federal withholding tables kicked in at the beginning of 2018, there were errors.

“Those tables incorrectly withheld too little tax for many taxpayers with wages or pensions, resulting in higher take-home pay but come tax time, lower refunds or larger amounts owed,” he said.

He said the underwithholding problem seems to have occurred because the tax tables still took into account the number of withholding allowances someone elected when filling out the W-4 form.

How does that work?

Withholding allowances equate to the number of dependency and personal exemptions someone has when filing their tax return. However, the 2018 tax law eliminated personal exemptions and replaced the dependency exemptions with a $2,000 per dependent credit for children under age 17 and a $500 credit for other dependents, Hook said.

“So based on that, those taxpayers whose W-4 withholding allowances were quite high - 4, 5 or even more - were hurt the most based on the way the tables were still being calculated,” Hook said.

You can learn more about that from a Government Accountability Office (GAO) study on the subject.

But are people actually paying more, or just having a smaller or no refund?

“It is my personal opinion that more people have benefited from the new law than what it appears because people are measuring their refund amount compared to last year - or amount owed - when they should be measuring the tax calculated instead,” he said.

He said even taxpayers affected by the SALT limitation would have fared better except for the fact that their tax payments through the year were incorrectly underwithheld.

Hook shared the story of one couple who lives in New York State. (Like our state, New Yorkers also face higher-than-average property taxes.) The couple had itemized deductions of $83,000 in 2017, but because of the SALT limitation, could only claim the standard deduction of $24,000. Their total income was $920,000 in 2017 and $972,000 in 2018, a 6 percent increase.

But their total tax burden?

In 2017 it was $280,000 and it was $292,000 in 2018, a 4 percent increase.

However, due to the underwithholding of federal tax, they owed $32,000 in 2018 when they only owed $6,000 in 2017, Hook said.

“The taxpayer used 5 withholding allowances, which resulted in much less taxes withheld than should be under the new law,” he said.

So what should taxpayers do to prepare in 2019? Check your withholding, Hook said, and then check it again.

A mixed bag

Gerard Papetti is a certified financial planner and certified public accountant with U.S. Financial Services in Fairfield.

“My experience is that most W-2 wage earners are ending up paying more or getting less back in large part due to the change in the tax withholding rates, not necessarily due to the new limitations on deductions,” Papetti said.

He shared a couple of client stories.

One divorced woman ended up paying approximately 20 percent more in federal tax, he said, because she lost three personal exemption deductions totaling $12,150 and faced the SALT deduction limitation.

“That was quite a surprise for her,” Papetti said.

Then there was a retired taxpayer who benefited from the increase of the standard deduction, even with the loss of personal exemptions. In the end, his effective tax rate was reduced from 13.4 percent to 7.9 percent, Papetti said.

And because the exemption for the Alternative Minimum Tax (AMT) was increased under the new tax law, fewer taxpayers were subject to AMT, Papetti said.

Papetti recommends everyone check their withholding, and if needed, increase withholding or estimated tax payments. Also consider converting taxable ordinary investment income to tax-free or qualified dividend income, he suggested.

AMT is still around

Clare Wherley is a certified financial planner and certified public accountant with Lassus Wherley, a subsidiary of Peapack-Gladstone Bank, in New Providence.

She said things were looking good for her AMT clients - at first.

“I had not one client who fell into AMT this year until finally, it hit,” she said.

The client had a $1.5 million capital gain and other income that was less than $200,000, and was assessed AMT of nearly $9,000.

What happened?

Wherley says despite lots of research, she still isn’t sure.

“The old AMT was much easier to explain to a client, particularly a New Jersey client,” she said. “Under the AMT rules, the state and property taxes deduction and any miscellaneous items were not deductible. Then a different tax rate was applied.”

But, she said, the new rules are so complicated that it’s impossible to provide generalizations for who and under what conditions AMT would be assessed.

After the crunch of the tax deadline, Wherley said she’s going back on the hunt for more concrete answers.

Winners and losers

Bernie Kiely is a certified financial planner and certified public accountant with Kiely Capital Management in Morristown.

Kiely said there are both winners and losers under the new tax law.

Winners? Those who used to be subject to AMT. Kiely said the AMT changes were a big deal for his clients, and for himself, personally.

“Previously about 25 percent of my tax clients paid the AMT,” he said. “I paid it every year for about the last 20 years. This year no AMT for me.”

Of the 80 returns he’s completed so far this tax season, only one taxpayer was subject to AMT.

Other winners included single filers who took the standard deduction because their deduction doubled, he said.

Seniors who live on Social Security and pension or IRA withdrawals also fared better, he said, because their tax withholdings were not based on IRS tables.

“They were based on a specific percentage they instructed the Social Security Administration, their former employers or their IRA custodians to withhold from their checks,” he said. “This percentage did not change but the new tax rates were reduced.”

Additionally, he said, a lot of seniors no longer have a mortgage so they tended to take the standard deduction and we know that doubled.

The self-employed were winners because of the 20 percent business income deduction, he said.

Among the losers, he said, were workers who have taxes withheld from their pay and receive a W-2 statement. Again, the withholding tables were to blame, but were these taxpayers really losers under the new plan?

“Overall, most people are paying less,” Kiely said. “People who were used to a certain level of tax refunds saw theirs to be lower. In some cases, much lower.”

“But people don’t think about how much they are paying, they only care about the size of their refunds,” he said.

So again, please check your withholding to make sure you’re not in for any nasty surprises with your 2019 tax return.

Have you been Bamboozled? Reach Karin Price Mueller at Bamboozled@NJAdvanceMedia.com. Follow her on Twitter @KPMueller. Find Bamboozled on Facebook. Mueller is also the founder of NJMoneyHelp.com. Stay informed and sign up for NJMoneyHelp.com’s weekly e-newsletter.