Things to Do If Your Tax Refund Is Lower Than Expected
Getting a tax refund is an eagerly anticipated event for taxpayers. More than seventy percent of taxpayers receive a refund check from the IRS after they file the return. However, as it can happen, you may receive a smaller refund than what you might expect.
Nonetheless, let us explore the potential reasons for your low tax refund.
There Was a Genuine Error
The IRS assesses the provided information by you with the information in their database when you file for a tax return. If they find a difference, you will receive a lower refund. You will actually receive a letter that explains the smaller refund.
Check out the answer to why is my tax refund so low so that you can learn more about potential causes for a low tax refund and how you can use the free software of TurboTax to review your refund before filing.
Your Income Was Higher than Expected
The first potential reason why your tax return was lower than expected can be linked to the fact that you earned more than usual. Yes, you read this right! Making too much money can be one of the top reasons for a lower refund. You might have taken up multiple or gotten one side hustle that might have placed you into a higher tax bracket.
What To Do About It?
It is important to adjust your withholdings every year, as you don’t want to give too much. If you do so, you will be given a free loan to the IRS. Similarly, you don’t want to go too low because you could have a low refund or no refund at all.
The BFS is To Blame
Another common reason you might receive a refund that is way less than what you expect is that the federal government has a massive program, which is referred to as an offset program. The IRS acts as a collector for a lot of other groups, and the Department of the Treasury’s Bureau of the Fiscal Service essentially manages this entire Treasury Offset Program.
What To Do About It?
You will get a letter from the IRS that will explain why this was offset and what estimate you had from your tax filing software. As stated in the letter, you will get the opportunity to dispute this collection, which can potentially delay your refund. However, you will have to prove that you had no federal obligations.
Tax Credit Adjustments
Another common reason that has emerged, especially in the last few years, is tax credit adjustments.
Tax credits, such as the stimulus checks, have now ended. There are no more dependent checks introduced in recent years, which means that if you had claimed for stimulus payments through your tax filing, you could have done that if you had a missing or underpayment based on the eligibility criteria.
What To Do About It?
You can leverage the Rectification Request Service and file a rectification request in the case of a tax credit mismatch. Depending on the situation, you might be eligible to have the same amount adjusted against potential tax liability in the future.
