FAQs
Is getting a big tax refund a good thing? No, some financial experts and taxpayers say, because it means you're giving up too much of your paycheck to taxes during the year. If less is taken out for taxes, you'll get a smaller refund but more money in each paycheck for expenses or saving and investing, they argue.
Why might it be disadvantageous to receive a large refund? ›
Intermediate Accounting
Your taxable income BEFORE deductions. Why might it be DISADVANTAGEOUS to receive a large refund instead of a smaller one? Receiving a large refund means you were OVERWITHHOLDING from each paycheck, and that's money you could have used throughout the year for other things.
What happens if you get a large tax refund? ›
So when you get a big refund, you're just getting your own money back. True, it's sort of a mandatory savings account that pays off once a year, but you're still losing money on the deal. That's because the IRS gets to use your money for most of the year, without paying you any interest.
Why is receiving a large tax refund a bad thing Ramsey? ›
If you get a big tax refund, you've just allowed the government to use your money interest-free for a year. When the IRS sends you that refund check, they're just giving you your money back. That's why it's called a tax refund. By adjusting your tax withholding, it'll feel like you gave yourself a raise!
Why do I always get a small tax refund? ›
Changes to your income last year may play a role in receiving a smaller refund this tax season. Here are some examples: Salary increase: If you got a salary increase last year but neglected to increase your tax withholding, this could lead to a smaller tax refund when you file.
Why don't you want a big tax refund? ›
Is getting a big tax refund a good thing? No, some financial experts and taxpayers say, because it means you're giving up too much of your paycheck to taxes during the year. If less is taken out for taxes, you'll get a smaller refund but more money in each paycheck for expenses or saving and investing, they argue.
How do I not get a big tax refund? ›
In most cases, a big refund indicates you aren't taking all of the withholdings and tax deductions you're eligible for. You can fix this by adjusting your tax withholdings with your employer.
Does a large refund trigger an audit? ›
Additionally, a refund is not necessarily a trigger for an audit.
Why do some people get huge tax refunds? ›
The biggest factor in determining a refund amount is how much you've paid in over the course of the year. Are you making an exact comparison? If the person you're thinking of has more dependents, or a different filing status than you, your tax returns will have widely different results.
How to get $10 000 tax refund? ›
CAEITC
- Be 18 or older or have a qualifying child.
- Have earned income of at least $1.00 and not more than $30,000.
- Have a valid Social Security Number or Individual Taxpayer Identification Number (ITIN) for yourself, your spouse, and any qualifying children.
- Living in California for more than half of the tax year.
Key takeaways
You can increase the amount of your tax refund by decreasing your taxable income and taking advantage of tax credits. Working with a financial advisor and tax professional can help you make the most of deductions and credits you're eligible for.
What if I got a bigger tax refund than expected? ›
If you receive a refund to which you're not entitled, or for an amount that's more than you expected, don't cash the check. For a direct deposit that was greater than expected, immediately contact the IRS at 800-829-1040 and your bank or financial institution.
Why did my tax return go down when I made more money? ›
Generally, more income means more taxes. Your new total income might be in a higher tax bracket. Your second W-2 could have pushed your total income into a higher tax bracket, making it taxed at a higher marginal rate. Your withholding credits may not have increased enough to cover your taxes from the second job.
How to get $7000 tax refund? ›
Requirements to receive up to $7,000 for the Earned Income Tax Credit refund (EITC)
- Have worked and earned income under $63,398.
- Have investment income below $11,000 in the tax year 2023.
- Have a valid Social Security number by the due date of your 2023 return (including extensions)
Why is my 2024 refund so low? ›
If you didn't account for each job across your W-4s, you may not have withheld enough, so your tax refund could be less than expected in 2024. Or, if you had a salary increase in 2023 but didn't update your tax withholding accordingly, you could receive a smaller refund.
Why did I only get a $100 tax refund? ›
If you owe money to a federal or state agency, the federal government may use part or all of your federal tax refund to repay the debt. This is called a tax refund offset. If your tax refund is lower than you calculated, it may be due to a tax refund offset for an unpaid debt such as child support.
What is the downside of receiving a tax refund? ›
A downside of receiving a tax refund is that it indicates you overpaid the government throughout the year, essentially giving them an interest-free loan with your money until you receive the refund.
Why do some people get bigger refunds? ›
The biggest factor in determining a refund amount is how much you've paid in over the course of the year. Are you making an exact comparison? If the person you're thinking of has more dependents, or a different filing status than you, your tax returns will have widely different results.
What is an excessive refund? ›
(b) Excessive amount. For purposes of this section, the term “excessive amount” means in the case of any person the amount by which the amount of the claim for refund or credit for any taxable year exceeds the amount of such claim allowable under this title for such taxable year.