Less generous tax breaks, child tax credit changes, and Recovery Rebate Credits getting expired are some of the reasons behind low tax refunds this year.
With the tax filing deadline approaching, you might be busy calculating your tax return and wondering why is my tax return so low this year.
Well, good old pandemic-era tax breaks are over. But there is more to it and in this post, we will find out why the estimated tax refund is lower this year and everything related to it. So, stick with me till the end.
Why Is My Tax Return So Low This Year?
If you are worried that you are getting less tax refund then you are not the only one. Though we all earn different amounts so the reasons can be different for different people. However, this year the IRS warned earlier that everyone will get less return in a newsletter
Taxpayers will not receive an additional stimulus payment with a 2023 tax refund as there were no Economic Impact Payments for 2022.
So, is that the reason why your tax refund is low?
Well, there is more to it.
Why Is My Estimated Tax Refund So Low?
Here are a few reasons why your tax refund may be low
- There are no Economic Impact Payments for 2022. As a result, there is no stimulus payment with the 2023 tax refund.
- The Child Tax Credit is being reverted to the pre-pandemic era which means it is reduced from a maximum of $3,600 per child to $2,000 per child. The Child and Dependent Care Credit are also back to the pre-pandemic level.
- The earned-income tax credit is also reduced from $1,500 to $560.
- Many gig workers don’t know that they need to pay self-employment taxes. So, if you are a gig worker then there is a high possibility you will receive a big tax bill and less refund.
- Having multiple jobs might be another reason. As you have to fill W2 form for each job. If you haven’t done so. Then the withheld amount will be reduced and you will receive a less tax refund.
These are some of the reasons Why you are getting a lower tax refund this year. If you are not sure which one affected you or having trouble filing your taxes then you are advised to consult with a tax expert. So, what about the unemployment tax refund?
Why Is My Unemployment Tax Refund So Low?
Like millions of Americans if you have lost your job during this recession then you must have claimed unemployment benefits. However, unemployment benefits are also considered regular income. So, it’s taxable.
As a result, if you have not withheld enough from the unemployment paychecks then you will expect a low unemployment tax refund.
Moreover, the unemployment income exclusion was only valid for 2020. So, now it’s being reverted back to the 2019 era. This might be another reason behind a low unemployment tax refund.
Now we know the answer to Why is my 2022 tax refund so low?
But can you somehow increase it?
How Can I Increase My Tax Refund?
Increasing tax refunds is no easy task. So, it’s better to consult with a tax professional. However, here is a few basic things you can do to increase your tax refund
- In case you have high medical expenses then Itemize Deductions.
- If you have a qualifying high health savings account then max out the contribution.
- Try to contribute the maximum allowed amount to a Traditional IRA.
- Take advantage of the Inflation Reduction Act 2022 and claim Credit for Energy-Efficient Home Improvements
Why Is My Income Tax Refund So Slow?
If your tax refund is slow then you might have made a mistake while filing taxes.
Usually, tax refunds come after 21 days of filing taxes electronically. However, if your ones are coming late then you might have put something in your return file that does not match the IRS data. It can be an error in your social security number or a sign you have missed.
However, don’t worry, just wait for a few days. If it does not get resolved then contact the local IRS authority.
Do You Get A Bigger Tax Refund If You Make Less Money?
No, you don’t get a bigger tax refund if you make less money. In fact, you get less return when you earn less.
Tax refunds are money a taxpayer has overpaid to the government. It can be due to their employer withholding more money than the actual amount or due to math errors. So, it’s not charity it’s actually the amount you owe to the government.
So when you earn less there is less chance of your employer withholding more and you making big math errors. As a result, if you earn less you will get fewer refunds not bigger ones.
Why Do I Pay So Much In Taxes And Get Nothing Back?
It is because your tax filing calculations are always correct or your employer has always withheld the right amount.
Getting less or even nothing as a tax refund is not a bad thing. It is actually a good thing inserted. Because you are not giving the government any extra money.
Moreover, you get this year’s refund next year. So, if you get a tax refund then for one year your extra money just sits idle and does not prove any interest. So, getting more tax refunds is not the most ideal thing.