There may be nothing you can do if you reported your income and expenses correctly. Strangely enough, an
income decrease can sometimes
reduce your refund. One example is reducing or losing the Earned Income Credit (EIC) . Your earned income goes down every
time you enter a business expense. Your EIC is based on your earned
income (gross income less expenses), so as your income goes down, so does your
refund.
When figuring your net earnings from
self-employment, you must claim all your allowable business expenses.
See Publication 596 - Internal Revenue Service, Chapter 5, page 21.
Without examining your
return, it's impossible to say exactly what caused your refund to decrease.
However, there's a high probability that at least one reason is listed below.
If your refund is
wildly off, it's possible you simply mistyped a dollar amount somewhere. An
extra digit here, a missing number there, even something as seemingly
insignificant as a misplaced decimal point can have an eye-popping effect on
your TurboTax refund.
Changes in your income
or tax rate:
- You (or your spouse) took on an additional job
(especially non-wage income which is taxed at the higher self-employment tax rate);
- Your salary or wages increased but your W-4 stayed
the same;
- You sold investments but didn't take out any
taxes from the sale;
- Your filing status changed from last year;
- You started receiving Social Security benefits or Roth IRA distributions;
- You received taxable unemployment income;
- You had gambling winnings;
- You're paying a penalty for not having health insurance coverage in 2017.
Loss of credits or
deductions:
- Your child turned 17 in 2017, causing you to
lose the $1,000 Child Tax Credit;
- Your child turned 19 in 2017 (or 24, if a
full-time student) and no longer qualifies as a dependent;
- You paid off your mortgage and can no longer
deduct mortgage interest;
- You took the itemized deduction last year (for
example because of high medical bills) but got the standard deduction this year;
- You didn't qualify for the Earned Income Credit this year;
- You paid off your student loan and can no longer deduct the interest;
- You're no longer eligible for certain education credits (or you took a different credit this year)
- You didn't contribute to a Traditional IRA (or
couldn't take the full deduction because your income was too high).
Related Information:
