“Why Is My Tax Return So Low?” Here’s What Could Affect Your Refund


Editor’s Note: It’s a common misconception to mix up the terms “return” and “refund”. This post will cover “Why is my tax refund so low?” versus “Why is my tax return so low?”

Your tax refund is a big deal. If you’re like many, tax season is a time to look forward to getting extra cash. But, is it possible that you’d have a smaller tax refund or that you might owe this year?

If you‘re questioning “Why is my tax refund so low?” There’s a reason for it. It’s the combination of several changes that will affect your overall outcome. We’ll go into the details in this post… Just read on and we’ll discuss the potential reasons for your low tax refund in 2019 (and 2020).

“Why Is My Tax Refund So Low in 2019?”

If the question “Why was my tax refund so low when I filed my 2018 tax return in 2019?” crossed your mind, it’s likely correlated with tax reform. Tax reform meant new tax bracketschanges to itemized deductions, and an increased standard deduction, and thus, confused many taxpayers.

Due to withholding changes in early 2018, some taxpayers began receiving larger paychecks, meaning they were paying less in tax as the year went on. For those taxpayers, that change could result in a smaller tax refund than expected—even if they paid less in tax overall.

Also, because tax reform passed in late 2017, the IRS changed the information employers use to calculate how much tax to withhold from their employees’ paychecks after the start of the year. That meant part of the year, some employees’ withholding was based on outdated tax laws, making some refunds and balances due different from previous years.

Another problem for some employees was that after the IRS updated its withholding tables, employees were encouraged to revisit their W-4s. Some taxpayers who didn’t update their W-4 were most likely to face significant changes to their refund or balance due. For example, the appropriate number of allowances may have been 6 for a large family under the old rules, but only 3 for the same family under the new rules and new withholding tables.

(Bonus tip: If you were unhappy with your 2018 tax return, you can also get a Second Look from a tax pro at H&R Block.)

“Why Is My Tax Refund So Low in 2020?”

If you’re wondering, “Why is my tax refund so low in 2020” (when you filed your 2019 tax return). Here is why.

Tax reform could actually impact your 2019 tax refund paid in 2020 as well.

As explained earlier, many employees needed to update their W-4s in 2018 but did not do so. So, if you hadn’t updated your information with your employer in 2018, they might not have withheld the right amount in 2019. If they withheld too much, you will likely get a refund. If they withheld too little, you may owe additional taxes.

While each taxpayer’s situation is different, it’s important to remember the role that withholding can have on what you get back. For this reason, it’s important to learn how to fill out a W-4.

Even without tax reform changes, it’s important to update your W-4 if you have a change in your personal or work situation such as getting a second job, getting married, or having a child.

(Bonus tip: Learn how to better manage your withholdings through our W-4 calculator.)

What to Do To Avoid a Low Tax Refund

Are you looking for ways to avoid a low tax refund? We can help. This year, H&R Block is offering the new No Surprise Guarantee. No surprises about price, process or IRS audits. H&R Block also provides a free mid-year care check that includes reminders, tools and an optional free in-office consultation to keep clients on track and help avoid unwelcome tax surprises next year.

If you are not sure why your tax refund was reduced, or the complexity around taxes has got you stressed, know that H&R Block is here to help. Fortunately, making sense of new tax laws is not new to us. We can help you file your taxes, check your withholding and understand your lower tax refund.

Make an Appointment to speak with a tax pro today.

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