The reason that your refund changed could be for many reasons.
If your refund is lower than expected this year, you’re not alone. A lot of people experienced financial hardships in 2020 that could have an impact on their refund. But don’t worry, TurboTax looks for every possible deduction and credit to maximize your refund!
The situations below are some of the most common reasons why you might be getting less money than you expected. For example, did you:
- Adjust your withholding to maximize your take home pay
- Receive unemployment benefits, but didn’t have taxes withheld
- Earn little or no income, so you didn’t qualify for the Earned Income Credit (unfortunately, unemployment doesn’t count as earned income)
- Complete a 2020 W-4, which more closely matches your tax liability
- Sell stock
- Take an early withdrawal from your retirement account
- Pay less tuition due to school closures, so you can’t deduct as much
To maximize your refund next year, invest, and/or pay taxes you might owe, consider some of these options:
- Amend your W-4 to increase the amount of withholdings for a higher refund next year; or
- Instead of withholding more, put that same amount into a savings account, an IRA, or other tax-sheltered vehicle
- If you can’t pay taxes you owe for unemployment benefits in full, the IRS offers alternate payment options. If you’ve already filed, you can complete an Online Payment Agreement application or request a payment plan by phone at 800-829-1040
- If your refund is wildly off, double check the amounts you input (a dollar amount mistype can have a big impact on your refund)
Here are some other possible reasons for a year-over-year refund decrease:
Changes in your income or tax rate
State and local income tax deduction changes
Losing certain credits or deductions
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