Did You Notice a Decrease in Your 2023 Tax Refund?

Did You Notice a Decrease in Your 2023 Tax Refund?

Many of our tax accountants have observed that clients are experiencing smaller refunds for 2023, with 2024 withholding amounts also showing a reduction compared to last year. The IRS has made adjustments to its withholding tables and the W-4 form to account for inflation and ensure more accurate collection of federal taxes. It seems the IRS is aiming to fine-tune withholding to avoid over-withholding.

The good news is that you’ll have more disposable income throughout the year. However, if you’ve intentionally had extra withholding to secure a sizable refund at tax time, you might be disappointed, as the new withholding tables could result in a significantly smaller refund or even a tax amount due. We recommend using the 2024 IRS Withholding Estimator to check your numbers: IRS Withholding Estimator.

Projecting your 2024 taxes

Planning for your 2024 taxes requires gathering your pay stubs from all jobs, including your spouse’s if applicable, along with other income sources like investments, and a copy of your 2023 tax return. The estimator will prompt you with questions to accurately project your 2024 taxes. If your tax situation is complex, consider consulting your tax accountant at Haynie & Company. We have software that enables us to import your 2023 tax return data, adjust for expected 2024 changes, and calculate your income and taxes owed or refunded.

What to do if I’m projected to owe additional tax, or if I want a bigger refund?

If you find yourself projected to owe additional tax or desire a larger refund, you can utilize Form W-4 to adjust your withholding. Calculate the extra withholding amount you desire for 2024, divide it by the remaining pay periods in the year, and submit an updated W-4 to your payroll tax department. Keep in mind that it may take a payroll period for the changes to take effect, so ensure you divide by the correct number of remaining pay periods.

What about State withholding amounts?

Each state operates differently, so there’s no one-size-fits-all answer. Generally, state taxes are lower than federal taxes, so it might not be as significant a concern for most taxpayers. If you’re unsure or have specific concerns, it’s best to reach out to your tax accountant for guidance.

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