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Posted by Dennis Jao

Why Is My Tax Return So Low?

Why Is My Tax Return So Low?

Getting your return from Uncle Sam is very important. If you're like many people, tax season is the time to wait for some extra cash. But is it possible that you have a lower tax return than expected?

If you are wondering, "Why is my tax return so low in 2021?" There is a reason for this. It's a combination of several changes that will affect your overall results, including the fiscal impact of the coronavirus pandemic. Read on, and we'll take a look at the possible reasons your tax refund could be so low for 2020 (and 2021).


Why is your tax refund so low in 2021

If you are wondering, why is my tax refund so low in 2021? You are not the only one. Many of the taxpayers who file the 2020 return are asking the same question. So, if your tax refund is lower than expected in 2021, it could be for several reasons:

  • Ignoring changes in eligibility for tax credits and deductions: There may be other effects on your refund because of the credits you can get. For example, suppose you took advantage of the rules that allowed you to withhold student loan payments. In that case, it could have resulted in a minor interest deduction on student loans, or if you did not pay for childcare due to the fact that your kids stayed at home during the coronavirus, your full eligibility for the child care credit might have changed.

  • Inappropriate accounting for withholding across multiple jobs: Each job will need to complete a separate W-4 form. If you haven't factored in all of the work on the W-4 forms, you may not have withheld enough, so your tax refund could be lower than expected in 2021.

  • No Estimated Taxes with Self-employment Income: Self-employment is on the rise due to increased self-employment opportunities. But not all self-employed know that they have to pay the estimated taxes on this type of income. Missing or skipping this step could mean an unexpected tax bill or reduced reimbursement in 2021. 

  • You did not withhold your unemployment earnings: The unemployment rate has skyrocketed in the United States, with millions of Americans claiming unemployment insurance. Many people don't realize that unemployment income is taxable, and not withholding enough (or none) of their unemployment benefits can affect a low return. The new American Rescue Plan Act provides an exclusion of $10,200 for unemployment benefits received in 2020. The exclusion can reduce your taxable income and give you a higher refund. if you received unemployment benefits If you filed your tax return before this change, consult a tax professional for more information.

  • You have worked fewer hours or have some employment gaps: Even if you were not made redundant in 2020, many companies have chosen to reduce their employee's working hours. This can affect your refund between tax years, even if you do the same job. If this is the case, you will have less income tax withholding; hence, less refund in 2021.


Why is my tax refund so low in 2020?

If you are wondering, why is your tax refund so low in 2020? There could be several causes for the 2019 returns filed in 2020. For some, new withholding tables were in effect for 12 months in 2019, but only ten months in 2018, maybe this is why the tax refund was lower than expected for 2020.

While every taxpayer's situation is different, it's important to remember how withholding tax can play in what you receive. For this reason, it is important to learn how to complete a W-4.

 

What if your tax refund is lower than expected in 2020 or 2021?

If you're surprised by a lower-than-expected tax refund in 2020 or 2021, you don't know why the tax refund has been reduced or whether tax complexity has made it obvious, a tax professional can help you factor out what went wrong. They can help you file your taxes, verify your withholding tax, and find the lowest tax refund.


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Dennis Jao
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