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January 7, 2021
Question

My Federal refund is quite a bit lower than last year. Did I make a mistake when filling out my information?

  • January 7, 2021
  • 1 reply
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I usually get all the Federal tax paid as a refund.  Did the tax rates change that much?

1 reply

Employee
January 8, 2021

 

No one in this user forum can see your tax return or your screen.  There were major tax law changes that began with the 2018 tax year that seem to continue to surprise some people.  Personal exemptions of over $4000 per person were removed beginning with 2018 returns.

One thing that may be affecting your refund is that employers began withholding less tax when the new tax law passed.  Your paychecks were more, but that means a smaller refund now. 

There are a lot of variables that affect your refund or tax due including how much you earned, how much tax you had withheld, your filing status, the number of dependents you claim, your deductions and credits, etc.  You may have lost Earned Income Credit or the Child Tax Credit— did a child turn 17?  If you received the EIC last year, remember that changes in the amount you earn have a big effect on the amount of EIC you can get. (Sometimes earning more money means less EIC)  Are you 65 or older ?  If so, your standard deduction is higher. Everyone has a higher standard deduction now so it is harder to use itemized deductions.

 

 

And of course, always check your own data entries, looking for errors such as misplaced decimals or extra zeros.

 

https://ttlc.intuit.com/questions/1901008-why-did-my-refund-go-down-compared-to-last-year-s

 

 

 

And if you are asking about your 2020 tax return, please keep in mind that a lot of forms are not yet ready so it is too soon to trust the results you are seeing on that "refund monitor."  

 

Please be careful about being in too much of a hurry to file your next tax return. Many tax forms are not available at the very beginning of the tax season, so you have to wait for your forms. The software still needs updates at the beginning of the tax season. 

 

The IRS will not begin to accept the e-files until almost the end of January.  So  even if you e-file before that, your return just sits on the server.  If you realize that you made a mistake or left something out—as many people do—you cannot change it.

 

 

Every year we see people who are in such a rush to file that they file incorrectly and incompletely.  If you file too early and leave out a W-2 or a 1099, or forget to enter information, you will end up having to amend your tax return---and that takes months.  Employers have until February1. 2021 to issue W-2's----and ALL of your 2020 W-2's have to be on the same tax return.  Many of the 1099's and 1098's you need do not arrive until late January or sometime in February.  If you are getting Earned Income Credit or Additional Child Tax Credit, the IRS is going to hold your refund until the end of February no matter how early you file.  There seems to be a greater chance of "early" returns being reviewed and those refunds are delayed, or early returns are more often subject to identity verification--which will also delay processing.  Filing too early may just be a recipe for a delayed refund.  It might go more smoothly for you if you wait until at least mid-February to file instead of e-filing during the first minute that you can do it.

 

 

 

https://ttlc.intuit.com/community/tax-topics/help/how-will-the-stimulus-package-impact-me/00/1393859

 

We know that the IRS is already revising the 2020 Form 1040 because of the 2nd stimulus and the EIC lookback.  That means all tax preparation software programs will also have to be re-programmed and updated.  Those changes could take until sometime in late January or even longer—we do not know yet.    Do NOT be in a hurry to file your 2020 tax return until more is known.   It is never a good idea to file too early; filing your 2020 return too soon may result in a lot of extra confusion that can be avoided if you wait and file a little later.

 

 

 

 

**Disclaimer: Every effort has been made to offer the most correct information possible. The poster disclaims any legal responsibility for the accuracy of the information that is contained in this post.**