Filing taxes can be a complex process, and it’s not uncommon for taxpayers to encounter discrepancies between the refund amount displayed in tax preparation software, such as TurboTax, and the actual refund issued by the IRS. This article will delve into the primary reasons why your TurboTax refund may be lower than expected, providing insights into potential errors, fees, and IRS adjustments.
Reasons for Refund Discrepancies
1. IRS Discrepancies:
The IRS thoroughly reviews tax returns and compares the information provided with their own records. If any discrepancies are identified, the IRS may adjust the refund amount accordingly. Common errors that can lead to adjustments include:
- Incorrect advance Child Tax Credit or stimulus payment amounts
- Mismatched Social Security numbers or dependents
- Mathematical errors
The IRS will typically send a letter explaining the adjustments made. If you have already received your refund, you can visit the IRS “Where’s My Refund?” website to view the adjustments and their impact on your refund.
2. TurboTax Fees:
If you choose to pay your TurboTax fees using your federal refund, the TurboTax fee and a separate Refund Processing Service (RPS) fee will be deducted from your total refund amount. This means that the IRS-issued refund may be lower than the amount displayed in TurboTax. The combined cost of these fees can range from $39 to $320.
3. IRS Refund Offsets:
In certain cases, the IRS may offset your refund to cover past-due debts, such as:
- Income taxes
- Child or spousal support
- Student loans
- State unemployment compensation
If your refund is offset, you will receive a letter from the IRS explaining the reason and the amount deducted. You can also check the IRS “Where’s My Refund?” website or the Bureau of the Fiscal Service website for more information.
Avoiding Refund Discrepancies
To minimize the risk of refund discrepancies, it is crucial to:
- Carefully enter all information from your tax forms and IRS letters into your tax return.
- Verify the accuracy of your Social Security number, dependents, and any other personal information.
- Double-check your calculations to ensure there are no mathematical errors.
- Keep a copy of your tax return and all supporting documents for your records.
Refund discrepancies can arise due to IRS adjustments, TurboTax fees, or IRS refund offsets. By understanding these potential reasons and taking steps to avoid errors, taxpayers can increase the likelihood of receiving the correct refund amount. If you have any questions or concerns about your refund, it is advisable to contact the IRS directly or consult with a tax professional.
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FAQ
Why is my TurboTax refund so low?
Does TurboTax give you your full refund?
Is it worth doing your taxes on TurboTax?
Is it cheaper to use TurboTax?
Is TurboTax free?
The service offers the TurboTax Free Edition. * So you’ll pay nothing to file state and federal taxes if you’re filing a simple tax return with limited credits, which means using only the IRS Form 1040. Situations covered include W-2 income, the Earned Income Tax Credit (EITC) and child tax credits.
Should I use TurboTax?
For most tax situations, TurboTax does a great job of covering your needs. TurboTax can be expensive, but you get intuitive forms and interfaces, good customer and confidence that you got an accurate tax refund with the maximum cash in your pocket. You may be satisfied with cheaper options if you have a simple tax situation.
How much does TurboTax cost?
Free Edition users get a payment of $30. TurboTax promises you the maximum tax refund — guaranteed. That means that if you find a bigger refund or smaller overall tax payment from another method, it will refund you the federal or state purchase price you paid for access to its programs. (Again, free users can get up to $30.)
What happens if TurboTax can’t connect you with a tax professional?
If the service cannot connect you with a tax professional, you will get refunded the federal or state purchase price paid. Free Edition users get a payment of $30. TurboTax promises you the maximum tax refund — guaranteed.