Wrong tax refund amount? What now?

This is the original blog post copy that ran on Thursday, April 23, 2015. It was updated on Wednesday, May 10, 2017.

Despite all the warnings, the recently wrapped 2015 filing season is shaping up, at least as far as refunds are concerned, to be about the same as last year.

Internal Revenue Service filing data through April 17 shows that the number of returns the agency received and processed was, in each case, fractionally greater than at the end of the 2014 filing season.

The average refund amount also was very close. It was $2,711 this year, about 1 percent larger than the average 2014 filing season taxpayer check.

The big difference, comparatively speaking, so far is in total amount of refunds issued and the dollar total of those paybacks to taxpayers.

Why fewer refunds? The IRS doesn’t speculate on why 2015’s numbers in these refund categories are smaller, but I will.

Some folks got smaller or no refunds this year because of the Affordable Care Act, or as it’s popularly known Obamacare.

This is one pre-tax-season prediction that does seem to be coming true.

People overestimated how much federal subsidy, or premium tax credit, they were eligible for when they bought their ACA mandated health coverage via the marketplace. That meant at tax filing time when they reconciled that advance premium payment amount, their expected refund was less or nonexistent.

Refund check surprise: Sometimes, though, the difference in refund doesn’t show up until the check or direct deposit amount arrives in a mailbox or bank account.

When your refund check is less or more than the amount you figured on your 1040, then what?

As noted in this week’s Weekly Tax Tip on dealing with wrong refunds, the IRS should send you an explanation of the reason for the difference in your calculated refund amount. The big problem here is that the notice typically comes separately from the check or direct deposit, so you have to wait.

If the amount is less than you expected, it’s usually OK to go ahead and cash the check or spend the direct deposit.

If you disagree with the IRS rationale for the reduction and can show that you deserved the larger expected amount, the agency will make up the difference.

If, however, the IRS’ math was right, then you’ve got all you’re getting.

When a tax refund is larger than you expected — yes, it happens; that was the case in an unexpected $4,000+ refund the hubby and I got one filing season because of an error on my part — you might want to hold off spending the money until you get a satisfactory explanation. That way if the IRS was too generous and you do happen to have to pay some or all of it back, then you’ve got that cash in hand.

Offset issues: So what, other than Obamacare miscalculations, can account for differences in tax refund amounts claimed and those issued?

The most common reason is missed government financial obligations, such as federal student loan or state court-ordered child support payments or unpaid state income taxes.

This collection of other debts by Uncle Sam is known as an offset and is administered via the U.S. Treasury Offset Program, or TOP.

The bottom tax refund line, be it larger or less than you expected, is that refund differences are relatively common. So don’t freak out if your cash back from the IRS is not what you had planned.

Just make sure the change is correct.

You also might find these items of interest:

• The many ways a refund can go astray
• Man gets $161,392 erroneous tax refund
• Tax identity thief mistakenly sends fake refund to real filer

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