WHY IS YOUR TAX REFUND SO LOW IN 2021?

If you’re questioning “why is my tax refund so low in 2021?” you’re not the only one… 

Many taxpayers filing their 2020 returns are wondering the same thing. So, if your tax refund is less than expected in 2021, it could be due to a few reasons:

You didn’t withhold your unemployment income: The unemployment rate skyrocketed in the U.S. with millions of Americans filing for unemployment benefits. Many people don’t realize that unemployment income is taxable, and they don’t withhold enough (or anything) from their unemployment checks. 

The new American Rescue Plan Act provides an exclusion of $10,200 for unemployment income received in 2020. If you received unemployment, you may find the exclusion will reduce your taxable income and may provide you with an increased refund. If you filed your tax return before this change, check with your tax professional for more information.

You worked fewer hours or you have some employment gaps: While you may not have been laid off in 2020, many businesses choose to reduce hours. This could affect your refund between tax years, even if you work the same job. If this is the case, you have less income tax withholding, so less to get back as a refund in 2021.

No estimated taxes with gig income: Gig employment is on the rise due to more independent contracting opportunities. But not all gig workers know they need to pay estimated taxes for this type of income. Missing this step could mean an unexpected tax bill or a low refund in 2021. Check out our tax guide for gig workers for the essentials.

Not accounting for withholding across multiple jobs: Each job you have will result in you having to fill out a separate W-4 Form. 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 2021.

Not factoring eligibility changes for tax credits and deductions: There may be other impacts on your refund due to the credits you can take. For example, if you took advantage of rules that allowed for suspended student loan payments, it may have resulted in a lower student loan interest deduction, Or, if you didn’t pay childcare due to your children staying at home during coronavirus, your eligibility for the full Child Care Credit may have changed.

What to do if your tax refund is less than expected in 2020 or 2021?

If you think that you may need help filing your 2014, 2015, 2016, 2017, 2018, 2019 & 2020 Form 1040 tax returns or past due tax returns, you may want to partner with a reputable tax relief company who can help you get the max refund and reduce your chances for an IRS AUDIT.

 

Advance Tax Relief is headquartered in Houston, TX with a branch office in Los Angeles, CA. We help many individuals just like you solve a wide variety of IRS and State tax issues, including penalty waivers, wage garnishments, bank levy, tax audit representation, back tax return preparation, small business form 941 tax issues, the IRS Fresh Start Initiative, Offer In Compromise and much more. Our Top Tax Attorneys, Accountants and Tax Experts are standing by ready to help you resolve or settle your IRS back tax problems.

 

Advance Tax Relief is rated one of the best tax relief companies nationwide.

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