Why is My Tax Refund So Low Compared to Prior Years

A lot of people have started getting their tax refunds based on the latest IRS schedule. But one question that keeps coming up is why is it so low? Or more precisely why is the refund payment so much lower than expected compared to past years. In fact the IRS has published figures that refunds are down 8% to 10% from prior years.

One significant reason for this is the new tax laws and reforms that took effect last year which cut several popular deductions (e.g. state and local taxes capping at $10,000) for a number of Americans.

Other reasons for smaller refunds can be attributed to various causes related to your income, tax rate and number of withholdings claimed via your W4. Here is a sampling of scenarios based on actual reader comments that could be causing your refund to be much lower than you expected. If you have encountered a time when your refund was lower than expected feel free to leave a comment describing your scenario and I will assess your situation (no private details like SSN or DOB please).

Scenario 1 (multiple jobs): Mary is a single person and in the past has always gotten a large refund back. However this year, Turbo Tax showed she was due a $400 tax refund. But Mary made way more last year than ever having worked for two different companies. Mary made $15,000 at one job (tax withholding was ~$1200). At her other job she made $14,800 and had a similar withholding amount. So should she have got a larger refund since she made more money?

Answer: The reason Mary is getting a much smaller refund is that her tax withholding was much lower than it should have been since it was likely calculated for each job based on her salary being the annual amount.  That is one employer thinks she earned $15,000 and withheld taxes based on that annualized income. The other place thinks she earned $14,800 and withheld taxes based on that income. But Mary really earned $29,800 for the year and should have had more taxes withheld based on your total income. To fix this going forward she needs to adjust her W4 for the current tax year is she wants to get a larger refund the following year.

Scenario 2 (too few withholdings): I tried several tax software providers and they all come back with a federal refund of only a $95. This is the lowest I have ever got and I made the most money ever this year. I am single, own no property or anything, made around 14,000 last year ($590 federal withholdings). I claimed 2 deductions (withholding) on my paycheck as I have no dependents.

Answer: The answer for your lower refund is your deductions claimed via your W-4. Based on $14,000, your taxable income is around $4,850. Tax on that amount is $495 and with having $590 taking out, you’d get a $95 refund. You must have your deductions higher than 2 if you want more tax taken out so that you can get a higher refund next year.

Scenario 3 (making more money than last year, smaller refund):  Last year my wages were around $30,000 (withheld taxes of $2,240) and state income tax was $1,500. When I entered this info into TurboTax get a free refund estimate before filing, both of them showed my federal refund at $47.  However two years ago I made much less (around $22,000) and my return was almost $2000. What is going on? I am a single filer with no dependents and didn’t claim or get any other credits.

Answer:  The most likely reason for the smaller refund, despite the higher salary is that you are now in a higher tax bracket.  And you likely didn’t adjust your withholdings for the applicable tax year. To understand this you need to realize that your tax refund is determined by your total income, marginal tax rate and the amount of federal/state taxes that are withheld. So since your taxable income was higher you fell into a higher tax bracket that resulted in higher taxes. But you would have got more money on a weekly basis (due to your higher salary) as well – which is better than getting a larger refund in my opinion.

Refund Offset

Another reason why some folks refund is actually less than the amount they were expecting or provided by their e-filing tool is that the federal government has “offset” or deducted monies from your tax refund to cover debts you owe other federal agencies. Under the law, federal payments such as tax refunds can be collected against by approved agencies (e.g the IRS) before being paid to you. You will get  a letter from the IRS explaining this offset to your federal refund and why it differs from what was estimated in your filed return. They will give you an opportunity to dispute this collection, but you will have to prove you had no federal obligations. If you have questions regarding the offset of your refund you can call the Treasury Offset Program (TOP) on 800-304-3107.

At the end of the day getting a smaller refund with a higher income is not actually a bad thing in most cases. It basically means you didn’t give an interest free loan to the IRS (which is what a refund represents). In reality you don’t want a large refund as you should get the money in your pay check when you earn it. Not a year later.

40 thoughts on “Why is My Tax Refund So Low Compared to Prior Years

  1. Bob s

    I don’t understand why we went from around $9000 back to $900. We did not change any deductions from last year. We claimed 0 both years. There was no significant wage change from either my wife or myself. So it looks as though we just gave the government $8000 free and clear. That work out to a 90% decrease far higher than the 5-10% that the IRS is stating

    Reply
  2. J

    I agree totally with you all. We made considerably less this year. All mairriage and new home owner exemptions, gone. All credits, gone. Donations, gone. If you didn’t put 24,000 into your house or subsequent assets…you get nothing. What is truly the saddest is that this is a situation where people who voted for a person who promise better has lied and padded the pockets of everyone (including himself) handsomely. Last year we did work on our home. And both went to school. While working full time. Our return last year helped about half of what we spent just on the house. We have been doing more and still furthering ourselves and working. All breaks are gone. We now have a child on the way and owe now. Not to mention that the city deemed our home 40,000 dollars more than the last years estimate due to the area so we get to pay taxes on a house that has had INTERIOR aesthetics done to the tune of a 40,000 difference in one year?? My payments just went way up due to this and all I’ve been told is I can contest it. Really?

    Store owner just decides your wage is too high and just docks you a third of your wage.” If you want to contest it, here is where you go. Good luck. Btw you’re fired for asking questions. “

    Reply
  3. Isda Espino

    Getting $6,000 less from our refund compare to last year. 0 claim on w-4, mortgage, daycare 3 kids. In comparison from last year yes we paid $2k on taxes last year. If you take that $2k out of the $6k we are are still $4k less on our refund compare to last year tax

    Reply
  4. Regina

    My 19 year old daughter attends Eastern Michigan university part time and lives in Cincinnati Ohio and she has a part time job in Ohio and Michigan,12,000 in scholarships and this year when she filed her taxes she’s only getting back a little over 500 but last year she’s received about 1400 and i don’t understand why .

    Reply
  5. DG

    I made the same amount as last year and same withholdings and single, own same home— everything the same and yet I got $5500 last year and I am being told I owe $1300. I have always claimed 5/ single. For some reason my employer took out way less federal taxes on my W2? Why??? Even my accountant is asking me did you claim exempt? No! Nothing has changed…..

    Reply
  6. Pat

    I am on Social Security (I am over 80 years old) and have a very small pension and miniscule interest income (less than $100 total). I am just getting ready to file my taxes and see that my tax refund is going to be over $100 less than last year. It does, certainly, seem that this tax cut is not helping those of us on low fixed incomes along with hardworking folks with families whose incomes are NOT in the hundreds of thousand dollars per year. What lies they fed the people on the bottom rungs of the financial ladder – this is more than shameful, .

    Reply
  7. Cathy gery

    wake up you get more in you pay check. put it in your 401 k and make 5 to 6 percent a month

    Reply
  8. Mary

    I’m on security and my husband pension.Everything is the same from last year and I received 3500,this year it’s only 569,why !!!!

    Reply
  9. Michael

    What a joke. What happened to last year when Trump said we were getting tax breaks. I go from a refund to owing. Sounds like propaganda to me. What a friggin joke

    Reply
  10. Paul Bustamante

    In 2018, i paid double the amount of taxes from the year prior. I went from having 1 child, to 2 children. And i recieved the same refund back while staying in the same tax bracket.

    Reply
  11. patty

    Both my husband and I claim single 0. Jobs are the same, income went up a couple thousand but did not put us in a higher tax bracket. Have a college student and received a $6,000 tax refund last year. OWE $2,000 this year WTF!!!!!!

    Reply
  12. Rick

    I keep hearing that child tax credits should increase my refund, but my return was substantially lower than it has been in years. My income is about the same and the 2 children I claim are the same, but my return was cut nearly in half

    Reply
    1. Tesha

      I have 5 children, 4 of which are in school and I pay crazy amounts per year for their educational expenses etc. I didn’t qualify for anything and I actually made less this year versus last year. Interesting how that works.

      Reply
  13. Jay

    2017 received $2800. Just did a draft for 2018 only $1100 as a single and if I try head of household only a return of $800. I also have an additional $50 per pay taken out. So if I didn’t do that I guess I would receive nothong. Thanks Dumpf. Make America Pissed Off Again.

    Reply
  14. KittyLover13

    I support Trump and am a very conservative Republican. But I did nothing different this year and have worked for the same company for 11 years. I only got a slight raise in 2018 over 2017. I’m a homeowner but don’t have any stock or any extra income. Yet my federal return is only $97 this year compared to an average of $800.00 in recent years. I truly don’t understand the new tax situation. In years past I always itemized because I give donations to charity and church and could deduct things like my mortgage interest and car tags. This year I couldn’t itemize because my deductions will never exceed the new $12,000 personal deduction. Like most middle class people, I look forward to getting a tax refund. I use the money to do home repairs and improvements, so this is very disappointing. I’ve now updated my W4 and am taking out an extra $10 each paycheck so I don’t end up owing next year.

    Reply
  15. JH

    2018. Married filing jointly with a mortgage, no kids, single earner… nothing has changed from prior year other than making slightly more (annual raise/increase).
    Last year’s standard deduction was 12,7000… this year its 24,000.
    My tax return this year is $500 less than last year.

    Which isn’t horrible, I see others have it way worse.

    I was trying my best to compare last year’s form to this years and the one major thing I noticed is last year they calculated some exemption for myself and my wife? I don’t fully understand it. It basically calculate some value against 2 people (myself and my wife), resulting in some $8K exemptions.

    This year’s form has no such entries at all.

    Reply
  16. Kobain

    Got 787 last year. Getting 79 this year. Pathetic. So who is getting my extra money? I rely on that money every year.

    Reply
  17. Rick M

    I was telling all my Trump friends to wait until they filed their 2018 taxes before they could tell me how great the Trump tax cut was. They all seemed to notice that their take home pay was larger and none of them got a pay raise from their employer. Pay me now or pay me later.

    Reply
  18. T.D.

    Compared to my previous years of consistent employment, this year stuck out because I was eager for the return, as nothing had changed financially, yet something HAD changed….and we’re not told correctly, because my refund was 2% of my previous tax refunds. 2%
    Not 50%, or 20%, or even 10%.

    2%

    Just crazy

    Reply
  19. MAS

    Is any part of Trump’s new Tax “Reform” bill causing refunds being so much lower than previous years? Has it gone into effect for this tax cycle?

    Reply
  20. Ally

    Single, head of household, 1 child dependent. My refund is FIVE. HUNDRED. DOLLARS. I have NEVER received this little in my life. Always been around 2-3,000. My lovely payroll woman at work has claimed it’s due to me filling out 6 exemptions on my W4, however I’ve had those on there since I begun this job in 2016 (Never didn’t fill them out because I’ve always filled them out so I’d get more on my paycheck and STILL received a reasonable refund) and my 2016 taxes were fine, over $2,500 as expected. WHAT is going on?

    Reply
  21. Dave

    I always purposely have the most I can taken out of my pay so when I get my refund I can afford a down payment or the like.(I don’t have a place) 2 years ago I was at a company and made about $28000 no deductions. When I did my taxes I only got 1300 combined because I worked a ton of untaxed OT. I have a new job and did the same exact thing and made the same money but all the OT was taxed. Got 700 this time…
    I read that it was because I should have paid around 6500 in taxes and I actually paid around 7200…why should I had paid over 22% in taxes.( I got 600 last year and made 8000.) Confusion.

    Reply
  22. Beth and Mark

    Claim 0 on W4, take an extra $20.00 out….previous years received approximately $2,000 refund. In 2018, refund is $205.00.

    Filing married.

    Something is not right.

    Working very hard and taking out the most possible amount of money and then only get a small amount?

    Hmmmm.

    Hoping we get a surprise check in the mail from our government to offset.

    Hey, we can dream.

    Reply
  23. Dirty Bastards

    My Gross income was just over 50k and I have given up 1/3 of my income for tax, insurance and various deductibles. I only got $600 back combined fed and state. That is some horse shit IMO. I’m paying honest tax and some lazy bogus fuckers get to enjoy spending other’s hard earned freaking money…. this is the world we are living in….

    Reply
  24. Sheila

    Hello…Yes I am very upset that my refund is less then half from last year. What is going on? You can’t claim your 17 year old who is in school anymore??? What is this? Please explain as we work hard for our money and need a good refund to fill in the cracks.

    Reply
  25. Donzel

    I’m seeing $2200 dollar reduction eventhough I earned the same amount as prior year.. None of my deductions or amount of dependents changed.. something is different..

    Reply
    1. Julie

      This is my exact situation and I can’t find an explanation anywhere. I thought we would not see any changes in 2017 and the change would come in 2018. Now I am scared to see what 2018 will bring!! Maybe no refund or having to pay?!

      Reply
  26. Barbara Cline

    I just filed my tax’s and I’m only on Social Security and I do get my pension and all I have for a refund is my state and this year is so low,last year I got $224 back on my state refund and this year is only $15 dollars. Talk about nothing ,that is a waste of paper to file it. I hate Trump for this, him and is so called republicans they now are more richer and the low low income citizens just got poorer. I thought this new tax bracket was to help us but it was just to get him more richer and our deficit is higher than any president we had. I just hate Trump.

    Reply
  27. K

    Having the same issue. Income same as last year as well as deductions. Federal, and resident state refund remains the same, but my nonresident return to a neighboring state is $600 less than last year

    Reply
  28. parker

    Trump enjoys showering with the taxpayers money and after it touches his orange body it is burned and disposed ofso no Republicans go dictatorship go f*** yourself 20018 20000 billion 19 Trump forever ever ever

    Reply
  29. Alivia

    Head of household 2 dependents and only made 15625 dollar whole year with 734 fed withholding why is my income tax this year under 3000 and last year it was 8338 dollars and nothing changed?

    Reply
  30. Scott McGuire

    Wondering why my refund is more than 2000 dollars less this year despite my income being almost exactly as it was last year. $26,500 income, 2 dependents, filing HoH. got 8100 combined last year, this year its saying i will get only 5900 combined. same W-4 as previous year. Can you explain why?

    Reply
    1. Sh

      I have gotten around $3,600 in the past. This year it’s saying I’m getting $1,000. I also made $6,000 less this year (22k) after my company merged with another. Not sure why the president claims that wages are going up not mine at least. it just sucks when you count on this money and pretty much is stolen from u.

      Reply

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