Why Some Americans Could See Smaller Tax Refunds This Year, Even If Their Income Didn’t Change
Why Some Taxpayers Are Seeing Lower Refund Estimates
As the 2026 tax filing season moves into peak volume, some taxpayers are noticing something unexpected: their projected refund is smaller than it was last year.
That does not necessarily mean the IRS made a mistake. In many cases, changes to withholding, tax credits, and filing rules are reducing refund amounts, even for households whose income has not changed dramatically.
Tax professionals and IRS officials have warned that several adjustments affecting 2025 returns could result in lower refunds for some filers this year.
Changes to Withholding Could Shrink Refunds
One major reason refunds may be smaller is updated federal tax withholding tables.
Over the past several years, the IRS adjusted withholding formulas to better align paycheck withholding with actual tax liability. The goal was to reduce the size of large refunds and increase take-home pay during the year.
If less tax was withheld from your paycheck in 2025, your refund may naturally be smaller in 2026 — even if your overall tax situation stayed the same.
The IRS has consistently advised taxpayers to use the Tax Withholding Estimator tool to avoid surprises at filing time.
Certain Tax Credits Have Changed
Some pandemic-era tax benefits that boosted refunds in prior years are no longer in effect.
While most temporary COVID-related expansions have already expired, taxpayers who became accustomed to higher refund amounts during those years may notice a continued return to pre-pandemic credit levels.
In addition, eligibility for certain credits, including the Child Tax Credit and Earned Income Tax Credit, depends on income thresholds. Even modest income increases can reduce credit amounts.
Source:
IRS Child Tax Credit Overview
Income Changes and Side Hustles Can Affect Refunds
Another factor this year is additional income reporting.
Gig work, freelance income, and digital platform earnings are increasingly reported to the IRS. If taxpayers earned additional income that did not have taxes withheld automatically, their refund could shrink, or in some cases, they may owe.
Tax analysts have noted that the rise in side income reporting has led to refund surprises for some filers who were unaware of estimated tax obligations.
Source:
IRS Gig Economy Tax Center
IRS Staffing and Processing Issues Don’t Change the Amount — But Timing Can Matter
It’s also important to distinguish between refund size and refund timing.
Recent reporting has highlighted IRS staffing challenges and heavy processing volumes this filing season. While staffing levels can affect how quickly refunds are issued, they do not change the amount owed to you.
However, delays combined with smaller refunds can create budgeting stress for households expecting a large lump-sum payment.
Source:
Associated Press reporting on IRS staffing challenges
What This Means for Your Wallet
If your refund looks smaller than expected, it may be due to:
• Adjusted withholding during the year
• Changes in tax credit eligibility
• Additional reported income
• Expired temporary tax provisions
A smaller refund does not necessarily mean you paid more in taxes overall. In many cases, it simply means you received more money in your paychecks during the year instead of as a lump sum at filing time.
For households that plan major expenses around refund season, including debt payments, rent, or large purchases, reviewing your return carefully before filing can help you understand what changed.
As tax season continues, the key question for many families is not just when the refund arrives, but whether the amount matches expectations.
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