What to Know About the Amount of a Tax Refund

After filing their tax return, a taxpayer will know whether they are receiving a refund. Sometimes, however, a taxpayer’s refund will be for a different amount than they expect.

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Here are some reasons a taxpayer’s refund might be less than they thought it would be:

  • Financial transactions happening late in the year can have an unexpected tax impact if a taxpayer’s 2019 federal income tax withholding unexpectedly falls short of their tax liability for the year. Certain transactions can affect 2019 tax withholding and influence the taxpayer’s anticipated refund next year. This includes things like:

       o Year-end and holiday bonuses.
       o Stock dividends.
       o Capital gain distributions from mutual funds and
          stocks.
       o Real estate or other property sold at a profit.
        
    If this happens, taxpayers can still make a quarterly estimated tax payment directly to the IRS for tax year 2019. The deadline for making a payment for the fourth quarter of 2019 is Wednesday, Jan. 15, 2020. 
  • A taxpayer’s refund can be used to pay other debts a taxpayer owes. All or part of a refund can go to pay a taxpayer’s:

       o Past-due federal tax.
       o State income tax.
       o State unemployment compensation debts.
       o Child and spousal support.
       o Other federal nontax debts, such as student loans.

A taxpayer receives notice if their debt meets the criteria for an offset. The IRS issues any remaining refund in a check or direct deposit as the taxpayer originally requested on the return.

If you have any questions or concerns about your taxes, please give us a call (919) 637-6731.