If you’re expecting your tax result to look similar to last year, you may be left wondering “Why did my tax refund go down?”.

Every filing season, we hear some version of:

“Nothing really changed — why is my refund smaller?”
“I made more money, so why do I owe?”

The truth is, even small changes throughout the year can have a big impact on your final tax bill. Here are some of the most common reasons your refund (or balance due) might look very different this year.

1. Withholding Changes (Sometimes Without You Realizing It)

Many employers updated payroll systems after recent tax law and W-4 changes. Even if you didn’t submit a new W-4, your withholding may have shifted.

Common scenarios we see:

• Less federal tax being withheld from paychecks
• Changes to filing status or dependents
• Multiple jobs in the household not coordinated properly
• Bonus or commission income withheld at flat rates that don’t match your actual tax bracket

When withholding drops, your take-home pay may feel better — but it often leads to a surprise balance due at tax time.

2. Bonuses Are Taxed Differently Than Regular Pay

Bonuses are typically withheld at a flat federal rate (often 22%), regardless of your actual income level.

If your total income places you in a higher tax bracket, that withholding may not be enough. The result? A smaller refund or unexpected tax due — even though the bonus felt heavily taxed at the time.

3. Side Income and Gig Work Catch Many People Off Guard

Driving, consulting, online sales, freelance work, or any side hustle income is generally not taxed automatically.

That means:

• No federal or state withholding
• Self-employment tax may apply
• Quarterly estimated payments may have been required

Even modest side income can significantly affect your return if nothing was set aside during the year.

For anyone earning side income, proper documentation is critical — we outline what records the IRS expects and common deductions in our guide to proper recordkeeping for individuals and small business owners.

4. Investment Income Can Create Surprises

Interest, dividends, capital gains, stock sales, crypto activity — all of these can quietly change your tax picture.

Common culprits:

• Investment accounts paying dividends without withholding
• Selling appreciated assets
• Mutual fund capital gain distributions (even if you didn’t sell anything)
• High-yield savings accounts producing more taxable interest

If retirement contributions are part of your strategy, we’ve also written about Roth IRA contribution limits and backdoor Roth strategies — another area where income changes can quietly affect your options.

These items often don’t feel like “income,” since it does not hit your bank account but they still count as taxable income.

5. Last Year’s Result Is a Bad Predictor

Many taxpayers assume last year’s refund means this year will be similar.

Unfortunately, that’s rarely true.

Your tax outcome depends on dozens of moving parts:

• Income sources
• Withholding levels
• Family changes
• Investment activity
• Business or side income
• Tax law adjustments

Even one change can swing your return by thousands.

This is why early planning matters — we recently shared what tax moves are still available in January and which ones are already locked in, so you’re not making decisions blindly at filing time.

Why We Encourage Reviewing Results Before Filing

This is exactly why we recommend reviewing your tax results before finalizing your return.

A quick review allows us to:

• Identify what caused changes
• Look for planning opportunities
• Adjust withholding or estimated payments going forward
• Help prevent repeat surprises next year

Taxes shouldn’t feel like a mystery — and proactive planning makes a real difference. If your refund or balance due doesn’t look how you expected, let’s talk. A brief review now can help you understand what happened — and put a better plan in place for the year ahead