A consistently low federal refund usually means your tax withholding matches your actual tax liability closely, or you are having too little tax withheld throughout the year. Common causes include not updating your W-4 after a raise, marriage, or losing dependency exemptions. Other reasons include owing debt (tax offset) or higher income reducing credits.
Refunds lower because of tax refund offsets
If your tax refund is lower than you calculated, it may be due to a tax refund offset for an unpaid debt such as child support. Get answers to frequently asked questions about the Treasury Offset Program (TOP), including: Why was my tax refund reduced?
How to maximize tax return: 4 ways to increase your tax refund
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 2026. Or, if you had a salary increase in 2025 but didn't update your tax withholding accordingly, you could receive a smaller refund.
There are lots of reasons why this might happen. In most cases, the IRS takes part of your refund to pay for outstanding government debts you might owe.
Sometimes, you'll receive a refund that's either more or less than you expected. Common reasons include changes to a tax return or a payment of past due federal or state debts.
Common tax return mistakes that can cost taxpayers
Even though the IRS didn't update federal withholding tables this year after the Working Families Tax Cut Act passed, your refund could still be smaller if: You updated your Form W-4 after a raise, new job, or other big life change. Your employer withheld taxes more accurately than in prior years.
In 2025, the federal poverty level definition of low income for a single-person household is $15,650 annually. Each additional person in the household adds to the total. For example, the poverty guideline is $32,150 per year for a family of four.
The IRS allows you to amend returns from the last three years, which sometimes results in delayed or unexpected refund checks. While a few taxpayers are genuinely seeing deposits of $2,000 or $3,000, those refunds are tied to specific past errors or missed credits, not a general program available now.
Avoid These Common Tax Mistakes
There are many events that may reduce your refund, including: Starting an additional job (especially self-employment) Getting a significant raise, but your W-4 staying the same. Selling stock, crypto, or other investments.
Some of the most common reasons are because you earned more income this year, you did not withhold enough taxes from your pay or you did not make enough estimated tax payments, or your deductions and credits were reduced this year.
To avoid the 22% tax bracket (or any higher bracket), focus on reducing your taxable income through strategies like maxing out 401(k)s and HSAs, deferring bonuses, tax-loss harvesting, smart charitable giving, and strategic asset location, understanding that higher rates only apply to income within that bracket, not your entire income.
The "20k rule" refers to the traditional IRS threshold for reporting income from payment apps and online marketplaces on Form 1099-K: over $20,000 in gross payments AND more than 200 transactions in a calendar year. While a law (the American Rescue Plan) temporarily lowered the threshold to $600, recent legislation, the One Big Beautiful Bill Act (OBBBA) (OBBBA), has reinstated the $20,000/200-transaction rule for tax years starting in 2025, providing relief for casual sellers and gig workers.