Did you receive a tax return this year? If so, how did it compare to last year? You’re not alone if you saw a reduced tax refund this year. Millions of Americans felt the same disappointment as you did preparing your tax return this spring.
The IRS reported paying out over $260 billion in tax refunds this year and while that’s a lot of money, it’s $5 billion less than a year ago. From the week of April 19, 2018, to April 19 of this year, return amounts were down 2 percent.
While it’s irritating to receive a lower than expected refund, there are actions you can take this year to potentially increase your refund next spring.
You may not have enough taxes taken from your paycheck
When you began working for your current employer, you probably filled out a W-4 form and entered a number like zero or on Line 5. These numbers are known as “allowances” and they determine how much in taxes your employer withholds from your paycheck.
A larger number will result in your paycheck taxed less while a smaller number will tax your paycheck more. Having more money now is great but can affect your refund when you file your tax return. Check with your employer’s human resources department to review your W-4.
Talk to the person who prepares your tax return
If you’re disappointed in your refund, your tax professional may have ideas for increasing your money back next year. Maybe there were tax credits you were eligible for that went unclaimed. Or you used the standardized deduction when you should have itemized. Every person’s tax situation is unique, and a tax expert can provide personalized advice tailored to you.
Consulting a tax expert like an accountant can be a good idea if you file your own taxes each year. You may have left tax credits and deductions that you didn’t know you were eligible for on the table. Even if you plan to continue preparing your own taxes in the future, a tax expert can provide advice that may lead to better refunds in the future.
No one likes surprises with their taxes and many people were shocked to learn that their tax refund wasn’t what they were expecting. Fortunately, there are ways to prevent against future surprises. Revising your W-4 with your employer and consulting with a tax expert are two great ways that may lead to a better tax refund next year.