As Tax Day looms, new tax law is stressing out and confusing Americans

Tax Day is a day away.

Americans are anxious and confused about their taxes, and as workers scramble to file their taxes before the deadline on April 17, it may only get worse.

A majority of workers (77%) are confused by the new Tax Cut and Jobs Act, according to a nationally representative survey of 2,500 people released in February by TaxAudit, a customer advocacy company based in Folsom, Calif. “This is the most dramatic remodeling of tax legislation we’ve seen in 30 years,” Mark Olander, TaxAudit chief executive, said. “Unfortunately, we expect the new tax law to further increase stress levels and confusion.”

“Most folks will benefit from the new rates, but some who are currently in the 33% marginal tax bracket will find themselves in the 35% marginal bracket next year,” Bischoff wrote. “This unfavorable change will mainly affect singles and heads of households with taxable income between $200,000 and $400,000.”

Taxpayers have good reason to be anxious about changes to the tax code. More than one-quarter of taxpayers did not even know a new tax bill was signed into law last year, and about half didn’t know income tax brackets are changing under those new rules, a separate survey by personal-finance site NerdWallet found.

Perhaps more worryingly, some 65% of Americans think common tax-reduction strategies are illegal, including making an extra mortgage payment to cut taxable income.

More than half of taxpayers don’t understand many basic personal finance questions about federal income tax returns as they relate to retirement, college savings and health care, a result not much changed from previous years, according to a separate survey released last year of more than 2,300 adults given by NerdWallet. That is a fail by academic standards.

Some 57% of taxpayers don’t know what a W-4 is and 59% don’t know the deadline for filing taxes. Also troubling: nearly half, or 46%, don’t know the difference between a notice from the IRS and an actual audit letter, according to the recent TaxAudit survey.

Check out MarketWatch’s Tax Calculator here.

This article was updated on April 16, 2018.