2020 wages: 23,469, Federal with held: 1,710 = Federal refund: 679 2021 wages: 40,081, Federal with held: 3,170 = Federal refund: 66. Seems off? Why so small?

[elyse12a]

The rest of my tax situation is virtually the same, in comparing the 2 years.  Can someone please explain why my Federal refund is so small?  I want to be sure that I did everything correct before I file.

[DanP0428]

Nobody can answer that without seeing all of your income and withholding.  You can look at last year and see i you had more withholding on same income.

[elyse12a]

Okay.....then what information can I provide so that you can get a better idea of whether these numbers seem right BEFORE I submit my return?

[VolvoGirl]

Usually more income = more tax = less refund. Your withholding didn't increase enough to cover the tax due. Or some credits you got are reduced because you made more income.

[DanP0428]

Total income, number of deductions, filing status, and amount withheld.

[DoninGA]

Assuming you are filing as Single your taxable income is probably about $27,531 in 2021.  The taxes on $27,531 are $3,104

$3,170 (-) $3,104 = $66

[elyse12a]

Yes, filing single.  2021 wages: 40,081, Federal with held: 3,170 = Federal refund: 66.   So. you're saying that this seems accurate?

[DoninGA]

---

@elyse12a wrote:

Yes, filing single.  2021 wages: 40,081, Federal with held: 3,170 = Federal refund: 66.   So. you're saying that this seems accurate?

---

Yes it would be accurate.

As your income increases you move into a tax bracket which taxes your income at higher rates.

Your taxable income is taxed at 10% from $0 to $9,950. 

Your taxable income is taxed at 12% for the amount $9,951 to $40,525

[elyse12a]

Thanks.  So that means that I also was taxed at the higher rate in 2020, when I made $23,469, but still got a $679 refund.  Just seems proportionally off to make $40,081 in 2021, and only get a $66 refund.

[VolvoGirl]

No.  Just the withholding in 2020 was 679 more than you needed to cover the tax due versus the 2021 withholding.    And you probably qualified for more credits with a lower income.   And in 2021 there was the 3rd Stimulus check and Advance Child Tax Credits that would affect your return.  

[VolvoGirl]

Compare 2020 & 2021 line by line.  Especially see the tax on line 16.  That's what your withholding is to cover.  

[SweetieJean]

Also note that income increases can also lower come deductions/credits.