Taxes are a necessary part of life, but it can be frustrating to feel like you’re paying more than your fair share. If you’re wondering why your tax refund is so small or why you owe money to the IRS, there are a few things you should consider.
Reasons Why Your Refund May Be Small
There are many factors that can affect the size of your tax refund, including:
- Your income. The more you earn, the more taxes you’ll pay.
- Your withholding. Your employer withholds taxes from your paycheck based on the information you provide on your W-4 form. If you claim too many allowances, you’ll have less money withheld from your paycheck, which could result in a smaller refund or even a tax bill.
- Your deductions and credits. Deductions and credits reduce your taxable income, which can lower your tax bill. However, if you don’t have many deductions or credits, your refund may be smaller.
- Changes in the tax law. The tax laws change frequently, and these changes can affect the size of your refund. For example, the Tax Cuts and Jobs Act of 2017 made significant changes to the tax code, which resulted in smaller refunds for many taxpayers.
Reasons Why You May Owe Money to the IRS
There are also a few reasons why you may owe money to the IRS, even if you had taxes withheld from your paycheck. These reasons include:
- You didn’t withhold enough taxes. If you claimed too many allowances on your W-4 form, you may not have had enough taxes withheld from your paycheck. This could result in a tax bill when you file your return.
- You have self-employment income. Self-employment income is not subject to withholding, so you’re responsible for paying your own taxes. If you don’t pay enough estimated taxes throughout the year, you may owe money to the IRS when you file your return.
- You received a large refund last year. If you received a large refund last year, it’s possible that you overpaid your taxes. This could result in a smaller refund or even a tax bill this year.
What Can You Do to Get a Bigger Refund?
There are a few things you can do to increase the size of your tax refund, including:
- Adjust your withholding. If you’re not having enough taxes withheld from your paycheck, you can adjust your withholding by submitting a new W-4 form to your employer.
- Take advantage of deductions and credits. There are many deductions and credits available to taxpayers, so be sure to take advantage of them. Some common deductions include the standard deduction, the mortgage interest deduction, and the charitable contribution deduction. Some common credits include the child tax credit, the earned income tax credit, and the retirement savings contribution credit.
- File your return early. The sooner you file your return, the sooner you’ll get your refund.
If you’re wondering why your tax refund is so small or why you owe money to the IRS, there are a few things you should consider. By understanding the factors that affect your tax refund, you can take steps to increase the size of your refund or reduce your tax bill.
IRS Tax Refund Update – Delays and Smaller Refunds
FAQ
Why is my tax return so low when I made more money?
Why is my refund smaller if I paid a lot in taxes?
Why do I owe so much in taxes when I make so little?
What happens if you pay more taxes?
If you pay more money, your take-home pay is reduced and you may end up with a tax refund. Doing so effectively gives the IRS a tax-free loan for a full year. If you pay less through your withholding taxes, you may owe money when you file your return.
Why do I owe taxes?
Common reasons for owing taxes include insufficient withholding, extra income, self-employment tax, life changes, and tax code changes. To lower your tax bill, you can try adjusting paycheck withholding, voluntarily withholding tax on non-wage income, planning for self-employment taxes, and recalculating taxes when life changes occur.
Why did I owe more taxes than I paid?
But at the end of the day, a tax bill boils down to simple math: You owe more taxes than you paid throughout the year. That usually means you didn’t have enough money withheld from your paycheck to cover taxes. Bummer. But figuring out exactly why you ended up owing Uncle Sam money is a little more complicated.
What if I don’t pay my taxes on a regular basis?
And in addition to your regular taxes, you’ll be on the hook for the self-employment tax. This 15.3% tax is made up of the employee and employer portions of the Social Security and Medicare taxes. 2 Not having taxes withheld from your paycheck on a regular basis means you could rack up a pretty big tax bill by the end of the year.