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Taxes

Tax Refund

What to Do if Your Tax Refund Isn't What You Expected

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Nicolas Ortega for Money

So you filed your taxes on time — good job! Now there's just one problem: Your refund isn't what you expected.

You aren’t the only one. Inflation spurred the IRS to change tax brackets and the standard deduction for 2023, sending refunds higher so far this tax season. At the same time, a recent survey suggests taxpayer expectations about refunds are all over the map this year.

All of this could result in some tax-refund surprises. As of mid-March, the IRS had issued nearly 50 million refunds with an average amount of $3,109 — a 6% increase from the same time last year. That's an average, though, and your own individual refund situation could be much different.

Whether your tax refund isn't what you expected or the amount you receive is flat-out wrong, here's what you can do about it.

Why your tax refund might be smaller than expected

There’s a slew of reasons your 2023 tax refund might be smaller than the one you received last year.

One explanation could be that pandemic-era benefits primed your expectations to be too high. Stimulus checks and the expanded child tax credit sent refunds surging during the pandemic, but those programs are officially in the rearview. Even so, you might still be used to the temporarily boosted amounts despite refunds shrinking back to normal(ish).

Another major reason for a smaller-than-anticipated refund is because your income may have increased in 2023, possibly putting you in a different tax bracket or disqualifying you from tax credits you previously received, both of which would change your refund amount. If you tweaked your tax withholdings on your W-4 because of this change, or forgot to do so after a big life event, that could also lower your refund.

Finally, you may owe the IRS money for back taxes. This tax season, the IRS is ramping up its debt collections efforts after being quite lenient with them during the pandemic. If you owe the IRS for past-due taxes, the agency might be applying your refund to your outstanding tax debt. Likewise, your tax refund can be reduced if you owe past-due child support payments or debts to certain other federal agencies.

If that's the case, the IRS will send you a notice about your overdue taxes and reduced refund. Otherwise, reduced-refund letters will come from the Bureau of Fiscal Services. (Remember: The IRS will never call, email or text you without warning.)

Also keep in mind that you may have chosen to split your refund into multiple bank accounts — or elected to use your refund to buy I bonds — which could mean you're seeing only a portion of your refund in your accounts or via check.

Why your tax refund might be bigger than expected

On the flip side, you might have received a refund that is bigger than what you were anticipating.

The most likely explanation is, again, the IRS's changes to the standard deduction and tax brackets. As a result of inflation, the 2023 standard deduction, which is $13,850, is a $900 increase from the previous year — in effect, letting you shield more of your income from taxes. Similarly, due to the increase of income limits for 2023 tax brackets, you may also owe less this year.

According to an Experian analysis, if you were a single taxpayer with a $110,000 income, these changes would save you about $450 in federal taxes — assuming all else as stayed the same since last year.

Many folks who bought a qualifying electric vehicle in 2023 could also see a major tax refund boost of up to $4,000 for a used EV and $7,500 for a new EV, thanks to the EV tax credit that went into effect in January 2023. (In 2024, the EV credit can be applied at the dealership, with no need to wait till next tax season to receive the credit.)

What to do if your refund is incorrect

Expectations aside, if the refund you officially received from the IRS does not reflect what's on your tax return, it may be due to an error.

It’s possible that the IRS made some corrections on your behalf — maybe you made understandable math mistakes — that would account for the extra money. If this is the case, the IRS will send a letter explaining the difference.

An incorrect refund could also be due to an error on the part of the IRS. If you think that’s the case, your course of action is a little more complicated, and you’ll need to get in touch with the agency directly.

For confirmed refund underpayments, the IRS says you're clear to cash the check or use the direct-deposited money as you see fit. The agency will mail you a letter about the miscalculation along with a check for the difference.

On the other hand, if the IRS overpays you, do not cash the check or use the money in your bank account: "Immediately contact the IRS at 800-829-1040 and your bank or financial institution," the agency says. There's a detailed process you may have to follow to return your erroneous refund.

A reminder: It’s possible for interest to accrue on the overpayment (even if it was the IRS's fault), so don’t wait to return the money if you're supposed to.

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Withholding can make your refund bigger or smaller

If your refund isn't what you expected this tax season, there's a way you can make sure you get the exactly what you want next spring.

Throughout the year, your employer is required to withhold a portion of your paycheck and pay federal, state and city taxes on your behalf through a process called withholding. The good news is you can tell your employer how much you’d like withheld using the IRS’s Form W-4.

The more money your employer withholds from your paycheck, the smaller your tax bill should be when you file in the spring. If you end up withholding more than you owe, you’ll get a refund from the IRS.

That’s good if you want a big refund — but keep in mind that withholding too much means that you are essentially giving the government an interest-free loan with money that you could otherwise save, spend or invest throughout the year.

Asking your employer to withhold less will mean you reduce the size of your refund (or possibly owe the IRS if you didn't withhold enough). The tradeoff? Your pay checks will be bigger each payday, and you’ll have more cash on hand. Many tax experts argue that smaller refunds are a good thing when they're due to optimized tax withholding, but ultimately, it's up to your preferences.

The IRS has a Tax Withholding Estimator tool you can use to determine the amount of withholding that makes sense for you.

Haven’t filed your taxes yet? Get on it

Don’t wait until the last minute to file your taxes. This year, there are more options than ever to file your taxes for free, given that 18 million Americans are eligible to test out the IRS's new, free tax-filing software.

Once you file, you can use the IRS’s Where’s My Refund tool or the IRS2Go app to track your refund’s status — no matter what size it is.