Why Is My Tax Refund Different This Year?

INCOME / WITHHOLDINGS

How did your income change in 2011?

• Did you decrease your withholdings on your 2011 W-4? Lower withholdings or lower deductions from your income mean that you will have more taxable income, which means you get a lower refund or you may owe this year.
  • That's the bad news. The good news: Lower withholding means you've been able to hang onto your money throughout the year instead of handing it over to Uncle Sam.
  • To change your 2012 withholding, you can go to the IRS W-4 website and fill out a new form W-4 or contact your HR department.

• Did you have unemployment income in 2011? Many people don't realize that unemployment is included in your taxable income. (In 2009 ONLY, the first $2,400 of unemployment wasn't taxable.)
• Did you receive an Earned Income Tax Credit (EITC) in 2010?  If your income increased for 2011, you may have gotten a reduced or zero EITC.  
  • The Earned Income Tax Credit (EITC) is a direct deduction from your tax liability, so reduced or zero Earned Income Tax Credit will increase the amount of taxes you owe.

• Your income increased over last year, but you did not change your withholdings to take care of the increase in income.  If this is the case, you will have more taxable income and less taxes withheld causing a lower refund or you may owe this year.
• If you had an additional job this year, or your spouse started working and you did not change your withholdings, you will have more taxable income and less tax withheld, causing a lower refund or more tax owed.  
• If you had gambling winnings, they’re considered income.
• Social Security:  If it’s the first year you’re getting Social Security benefits, you may have an increase in income, and it could be taxable.
• If you contributed to a retirement account in 2010, but didn't make a contribution in 2011, that could increase your taxable income.
  • Some IRA contributions are a direct deduction from income; therefore, if you chose not to make an IRA contribution you won't be able to take the deduction, thereby giving you more taxable income.

FILING STATUS / SINGLE, MARRIED, HEAD OF HOUSEHOLD, ETC.

Did your filing status change from 2010 to 2011?

• If you filed married filing jointly in 2010 and then filed married filing separately or as head of household or single in 2011, your tax rate would increase for 2011, and that would result in a lower refund.   

CHILDREN / DEPENDENTS

• If one of your children turned 17 in 2011: In 2010 you may have gotten the $1,000 child tax credit for a child age 16 or younger on your tax return (based on your income).  For 2011, if that same child turned 17, you can’t get that credit for that child regardless of your income. 
• If one of your children started first grade in 2011 and previously attended all-day child care, then your child care credit may be smaller or zero for 2011.
• If one of your children turned 19 in 2011 and is not a full-time student, you could have one less dependent on your tax return, which would result in a loss of a $3,700 deduction that you may have had in 2010.
• If one of your children turned 24 in 2011 (whether or not they are a full-time student) you could have one less dependent on your tax return, which would result in a loss of a $3,700 deduction that you may have had in 2010.
• Did you receive an Earned Income Tax Credit (EITC) in 2010?  If your income increased for 2011, you may have received a reduced or zero EITC.  
• If your dependent child took classes in 2010 and didn't’t in 2011 you may have received an education credit or tuition deduction on your 2010 return, but would not be eligible for it on your 2011 return.
• If you finished paying on a student loan for a dependent child in 2010 you may have a student loan interest deduction in 2010 and not in 2011. The Student Loan Interest deduction is a direct deduction from taxable income so if you did not pay interest in 2011, this will result in increased taxable income when compared with 2010.

EDUCATION / TUITION

• If you took classes in 20010 and didn’t in 2011 you may have received an education credit or tuition deduction on your 2010 return, but would not be eligible for it on your 2011 return. Education credits are a direct reduction of tax liability so if you don't have any for 2011 you may owe more taxes.  Tuition deductions are a direct reduction of income; therefore, if you do not have a tuition deduction for 2011 your  taxable income will be more than 2010.
• If you finished paying your student loan in 2010 you may have a student loan interest deduction in 2010 and not in 2011. The Student Loan Interest deduction is a direct deduction of  taxable income so if you did not pay interest in 2011, this will result in increased taxable income compared with 2010.

HOME / PROPERTY RELATED

• Did you move due to a job change in 2010?  The moving expense deduction is a direct deduction of income. You may have had a moving expense deduction in 2009, but not in 2011; therefore, you will have increased taxable income and may have a lower refund or owe taxes. 
• Did you purchase your first home in 2010? If so, you may have received a homebuyer’s credit of up to $8,000 in 2010, but not 2011. The homebuyer credit is a direct deduction from your tax liability.  If you did not receive the credit in 2011, your tax liability will be higher, resulting in a lower refund or you may owe tax this year.
• Did you purchase new windows or doors for your home in 2010?  If so, you may have had an energy credit up to $1,500 in 2010 and no such credit in 2011. The energy credit is a direct deduction from your tax liability.  If you do not have the credit in 2011, your tax liability will be higher resulting in a lower refund or you may owe tax this year.
• If you don’t itemize your deductions (Schedule A) but do pay real estate taxes on some property that you own: In 2009 up to $500 ($1,000 if married filing jointly) was added to your standard deduction.  For 2010 and 2011, real estate taxes are no longer added to standard deduction.  You have to itemize your deduction in order to deduct your real estate taxes. An increase in standard deduction will decrease your taxable income.  If you do not have the additional standard deduction in 2011 you may have a lower refund or owe this year.

MILITARY SERVICE

• If you’re in the military and served overseas in a combat area in 2010 and not in a combat area in 2011: Some or all of your military pay may not have been taxable in 2010, but some or all is taxable in 2011, depending on your combat situation. Higher taxable income may result in higher tax liability resulting in a lower refund.

INCOME / WITHHOLDINGS

• Did you increase your withholdings on your 2011 W-4? If so, you had more withheld to pay your 2011 taxes and may owe less than in 2010.  More withholdings throughout the year means that you may have paid more taxes than your actual tax liability so you may receive a higher refund.
• If you contributed to a retirement account in 2011, but didn’t make a contribution in 2010, that would change your taxable income. Contributions to some retirement accounts are a direct reduction to income, which reduces your tax liability.  Your reduced tax liability may result in a higher refund.
  • If you would like less taxes withheld in 2012, you can change your 2012 withholdings by going to the IRS W-4 website and filling out a new form W-4 or contact your HR department.

FILING STATUS / SINGLE, MARRIED, HEAD OF HOUSEHOLD, ETC.

Did your filing status change from 2010 to 2011?

• If you filed married filing separately or as head of household or single in 2010, and then filed married filing jointly in 2011, then your tax rate would decrease for 2011, and that would result in a bigger refund.

CHILDREN / DEPENDENTS

• Did you have a child in 2010? If you claimed the child as a dependent, you will receive an additional personal exemption of $3,700, which is a direct reduction of income.  You may also receive a child tax credit of up to $1,000 depending on your income.  
  • Note:  Even if you had your child on December 31, 2011, your child must have their own Social Security number in order to benefit from these deductions and credits.

• If one of your children started all-day child care in 2011, then your child-care credit would have increased your refund since the credit is a direct reduction of your tax liability. The Child Care Credit is a percentage of child care expenses and is based on your adjusted gross income, which may be subject to Earned Income Credit Limits.
• If your dependent child took classes in 2011:  you may have received an education credit or tuition deduction on your 2011 return.  Education credits directly reduce your tax liability and tuition deductions directly reduce income, which both may increase your refund. 
• If you started paying on a student loan for a dependent child in 2011: you may have had a student loan interest deduction in 2011. The student loan interest deduction directly reduces income, which may give you a bigger refund.

EDUCATION / TUITION

• If you took classes in 2011, you may have received an education credit or tuition deduction on your 2011 return.  Education credits directly reduce your tax liability and tuition deductions directly reduce income, which both may increase your refund. 
• If you started paying your student loan in 2011, you may have a student loan interest deduction in 201. The student loan interest deduction directly reduces income, which may give you a bigger refund.

HOME / PROPERTY RELATED

• Did you move due to a job change in 2011?  You may have had a moving expense deduction. The moving expense deduction is a direct reduction of income.  A direct reduction of income may increase your refund.
• Did you purchase a home, or purchase new windows or doors for your home in 2010?  If so, you may have had a mortgage interest deduction or an energy credit.   A mortgage interest deduction may directly reduce your income and increase your refund.  An energy credit is a direct reduction of your tax liability, which may also increase your refund.

MILITARY SERVICE

• If you’re in the military and served overseas in a combat area in 2011:  Some or all of your military pay may not have been taxable in 2011, depending on your combat situation. Lower taxable income may result in a lower tax liability and higher refund.

IRS Customer Service Centers will be expanding their business hours on April 17th to midnight (your local time) to answer any questions you still have.