Whether it’s contributing to a college fund, fixing a hole in the roof or just funding a vacation, millions of Americans depend on their tax refund every year. For some, it’s more than just extra money towards luxuries. It can be necessary to keep up with mortgage payments or repay debts. If your tax refund unexpectedly dropped, it could devastate your financial plans.
Sadly, this year many people are facing such an ordeal. IRS reports through this month show an average tax refund decrease of over 15 percent, compared to last year’s tax returns. Some people may even owe thousands of dollars they were unprepared to pay.
What causes the decrease
It’s impossible to discuss the changes in tax returns without looking at the 2018 tax reform that just went into effect. One of the most understandable causes of lower tax refunds is this: employers withheld less tax money from most peoples’ paychecks. As a result, some tax payers may have a lower refund this year. Others, who normally receive refunds, may find that they actually owe money this year.
What to do about it
If you had big plans for your tax return, it can be challenging to face a different outcome. It’s too late now to change what was withheld last year, but it is possible to have your employer withhold more going forward.
In addition, filing sooner rather than later will give you more time to thoroughly examine your taxes and get the most money you can. Instead of choosing the standard reduction, consider itemizing your expenses. This could lead to a bigger refund.