Many taxpayers filing their 2024 returns are noticing something disappointing – smaller refunds than they expected.
The IRS has confirmed that several factors are contributing to lower refunds this year, including adjustments to tax credits and offsets for unpaid debts. Here’s what you need to know and what you can do if your refund isn’t what you expected.
Why Refunds Are Lower for 2024
One of the biggest reasons for reduced refunds is changes to tax credits, particularly the Earned Income Tax Credit (EITC) and the Additional Child Tax Credit (ACTC). Some pandemic-era enhancements that temporarily increased these credits have expired, meaning many taxpayers are receiving less than they did in previous years.
Additionally, some taxpayers who qualified for larger credits last year may no longer be eligible due to income changes or adjustments in eligibility rules. It’s important to check your tax return and see if the amount you claimed aligns with IRS guidelines.
IRS Offsets: Your Refund Might Be Used for Past-Due Debts
Even if your tax credits haven’t changed, your refund could still be reduced if you have outstanding debts. The IRS participates in the Treasury Offset Program (TOP), which allows federal tax refunds to be used to pay off past-due obligations, including:
- Federal or state taxes owed from previous years
- Unpaid child support
- Defaulted federal student loans
- State unemployment overpayments
If your refund has been offset, you should receive a notice from the IRS explaining how much was deducted, which agency received the payment, and contact information for disputing the offset.
What to Do If Your Refund Is Lower Than Expected
If your refund amount isn’t what you anticipated, here’s what you can do:
- Check Your IRS Notice – If your refund was adjusted, the IRS will send a notice explaining why. Read it carefully to understand the reason for the change.
- Review Your Tax Return – Double-check the tax credits you claimed and ensure all information was entered correctly.
- Verify Any Debts – If your refund was offset, confirm whether you owe past-due federal or state obligations. If you think it was a mistake, contact the agency listed in the notice.
- Use the IRS “Where’s My Refund?” Tool – Visit IRS.gov/refunds to check your refund status and see if any adjustments were made.
- Contact the IRS If Necessary – If you believe your refund was reduced incorrectly, you can contact the IRS, but keep in mind that they will only investigate if more than 21 days have passed since e-filing or six weeks since mailing your return.
Plan Ahead for Next Year
To avoid surprises next tax season, consider adjusting your withholding through your employer or setting aside extra funds if you expect to owe. You can use the IRS Withholding Estimator to check if you’re on track.
While smaller refunds are frustrating, understanding why they happen can help you prepare. If your refund was lower than expected this year, take steps now to prevent the same issue in 2025.
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