I get this question every year. Why did my friend, neighbor, co-worker, relative, etc. get a bigger refund than I did? And the honest answer to that question is: I don’t know, I didn’t prepare their taxes. But here are some common reasons why some people might get a bigger refund than you do.
1. They withheld more. That’s the simplest explanation. Technically, you only get back if you overpaid your taxes. So, people who withhold too much, get refunds. If you get less, that actually means you win because you didn’t over withhold. (But trust me, I know. It really doesn’t feel like winning.)
2. They qualified for the earned income tax credit. EItC is one of those tax credits that you can actually receive even if you didn’t pay anything into the system. But—there are many requirements—most notably you have to have earned income. The EIC can make a huge difference in someone’s refund.
3. College tax credits—the American Opportunity Credit can be worth up to $2,500 on someone’s tax return. If your friend was attending school while you stayed home—that could be part of the difference also.
4. Different filing statuses—if you’re single, you could be in a higher tax bracket than your married friend. Or, if you’re married and your wife is also working—then you could be in a higher tax bracket than your single friend. Even though two people have the same job and earn the same amount of money—their circumstances outside of work could have a huge impact on their tax refund.
5. Different deductions—once again, it all has to do with things that happen outside of work. A person renting an apartment could be paying higher taxes than someone paying a mortgage because of the mortgage interest deduction—or any number of other deductions. There are just too many things to name.
6. Income—The more money you make, the more tax you pay. And people who make a lot of money have to pay the alternative minimum tax or AMT.
So, don’t waste your time worrying about your friend’s refund. The important thing is to think about what your goals are. Do you want a big refund? If so, how big of a refund do you want and what would you do with it?
Or would you rather take home more money with each paycheck? If so, what will you do with the extra take home pay?
But whether you choose a larger refund, choose larger take home pay, or maybe choose some middle ground; our job at Roberg Tax Solutions is to help you pay the least amount of tax while making smart decisions for yourself and your family. As long as you’re doing what’s best for you, it really doesn’t matter what your friends are doing anyway now does it?
Hi Tracey,
You should probably be reading this post instead: http://robergtaxsolutions.com/2012/01/court-ordered-exemptions-and-the-irs/comment-page-4/#comment-10520
Bottom line, you signed the agreement to let him claim your child. On the other hand, the IRS will probably side with you. You’ll probably win with the IRS–but you may have issues if he sues you in family court. You’ll want to talk with your attorney about that part, but I think you’re good with the IRS.
Hi Jan,
I tried to look through all the questions that individuals had previously asked, but found similar to but not my situation. I live in Georgia and was never married to my daughters father. I have been taken care of her since birth and always claimed her on my taxes. However I took him for child support when she was about 7 shortly thereafter he hired a lawyer and took me to court for child custody/visitation. In the parenting plan drafted up by his lawyer which I stupidly signed states he can claim every other year this plan was implemented in 2010, it states I’m the physical custodial parent and he has visitations which he doesn’t follow, in over 9 years he hasn’t consistently been in her life, I am in the process of taking him back to court to modify the parenting plan but is hiding from the sheriffs to serve him the papers…rest assure I will get him served because I feel he should claim her on his taxes when he doesn’t exercise his visitations and is in arrears for child support by 3k which I took him to court for that and the judge ruling was in my favor…. Long story short I received a letter from IRS starting my 1040A forms are being reviewed and I need to submit supporting documentation ie.. School records, deed, utility bills, medical record to show proof the child lives with me. I’m pretty sure my taxes got flagged cause both of us claimed her…my question is, even though the parenting plan is not amended yet can I claim her or can he if I didn’t sign an 8332 form?? Also he claimed her for 2010 without an 8332 form can I have IRS go back to fix that? P.S if I read correctly IRS don’t get involved in civil cases and don’t refer to a court order that has alternate years for parents if its after 2009? That would have to be taken up in court if anyone violates the court order? Correct?