If your refund was lower this tax year, you were not alone. In fact, IRS stats show refunds were down over 7% over the previous year.* There can be lots of reasons why. For starters, some refunds were lower due to the expiration of pandemic-era tax relief. But other reasons may point to changes in your tax situation that affect your bottom line.
Here are a few factors that can influence your refund:
- Changes in life may alter your eligibility for certain credits and deductions. For example, a child turning 17 may mean you can no longer claim the Child Tax Credit (but could claim the less valuable Credit for Other Dependents).
- Picking up side income. If you have self-employment income, you may not know you need to pay quarterly taxes throughout the year. Missing these payments could mean more taxes when you file.
- Job changes affecting your paycheck withholding. If you or your spouse added a job or started a new job, it could affect your overall withholding.
Why your withholding is so key. With every paycheck, you’re paying taxes as you earn. How much is determined by W-4 withholding. Those life changes and side jobs? Form W-4 factors it all in.
*Source: IRS statistics for the week ending May 12, 2023.