Many people rely on their tax refunds to do things like pay bills or dig their way out of credit card debt. So if yours is looking to be a lot smaller this year than it was last year, that might come as a financial shock.
If you’re in line for a smaller tax refund this year than last, you’re not alone. In a recent interview, Mark Steber, Chief Tax Information Officer at Jackson Hewitt, explained that many refunds are going to be less substantial due to pandemic-era benefits running out.
For example, the Child Tax Credit got a sizable boost in 2021. But that boost didn’t carry through to 2022, which means that tax-filers won’t get the same benefit from that credit that they did a year prior.
Now, it may very well be the case that the smaller refund you’re seeing is the maximum refund you can expect to hit your bank account this year. But before you submit your tax return and lock that refund in, Steber says you may want to do these things.
1. Take a second look
At a time when inflation is surging, it’s important to squeeze out as large a refund as you can. So before you submit your tax return, give it a second look. Review different credits and deductions and make certain you’ve claimed every one you’re entitled to. And if you’re self-employed in any capacity, make sure you’re claiming those benefits, too.
Let’s say you work a side hustle as a math tutor. If you spend money on rideshares to get to your clients’ homes, those are expenses you should be eligible to deduct.
2. Consider any life changes that occurred last year
Maybe you had a baby in 2022, or got married or divorced. Changes like these could render you eligible for tax breaks you couldn’t claim before, so it’s worth reading up on what those might entail.
3. Get some help
The tax code is extremely complex, and it’s loaded with rules. Chances are, you don’t know what all of them entail. And that’s why it could pay to enlist the help of a tax professional if you’re hoping to give your tax refund a boost.
A tax professional isn’t going to bend the rules and suggest that you claim a credit or deduction you’re not actually eligible for. But what a tax professional might do is alert you to credits or deductions you didn’t know you could claim.
You may be thinking, “But what I gain in terms of a larger refund, I’ll spend on a tax professional’s fee.” That may or may not be true, depending on how the numbers work out.
But think of it this way. If a professional informs you of a tax break you’re allowed to take that you never would’ve discovered yourself, you may be able to claim it for many years going forward. So even if you don’t come out ahead financially on that fee this year, you might come out ahead in the long run.
A smaller tax refund can be a bummer, but you’re not necessarily stuck with one. Even though a lot of filers will inevitably get a smaller refund this year than last, it still pays to make these moves before submitting your tax return for good.