CPAs Explain: The 5 Most Common Refund Surprises Taxpayers Face

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For many taxpayers, a refund feels like proof that they did something right or a small financial win at the end of the year. When that refund turns out to be smaller than expected, or disappears entirely, the reaction is often confusion or frustration, even if income hasn’t changed much.

According to CPAs, refund outcomes are shaped by dozens of small decisions made throughout the year. Here are five of the most common refund surprises CPAs said catch taxpayers off guard and how to avoid them.

1. Basing Refund Expectations on Previous Refunds

The single most common refund surprise CPAs see is the expectation that you should get a refund every year. “People expect their refund to repeat, but refunds don’t run on memory — they run on math,” said Gregory Monaco, a CPA and owner of Monaco CPA.

One reason for this this may be grounded in the average person’s earliest job experiences, where an employer’s withholding covered more than their total tax liability, making refunds “the norm,” said Josh Borges, CPA and senior tax manager at Truepoint Wealth Counsel. “After many years of experiencing refunds, taxpayers get used to this situation and aren’t aware that this may not be the case forever, and that their withholding decisions are what’s causing the refunds.”

2. A New Job Quietly Changed Your Withholding

Changing jobs is one of the most frequent refund triggers CPAs encounter. “I usually see surprises when a person changes jobs,” Borges said. “They’re getting onboarded with a new company and have many forms to complete, and they fill out their withholding form too quickly and make a mistake.”

Additionally, “silent” paycheck changes like a new job or new W-4 can change withholding without being obvious week-to-week, Monaco noted. “Paychecks are based on payroll formulas; your return is based on full-year income, deductions and credits. Those numbers drift.”

3. Making More Money but Getting a Smaller Refund

It’s also common to assume that if you earn more money then you will get a bigger refund. However, if your salary jumped one year, note that “refunds do not increase with it,” Borges said. You often jump into a new tax bracket that takes a bigger bite. “Any sources of income that do not have withholding will reduce refunds.”

Additionally, if you have any kind of side hustle, it’s easy to underestimate how additional earnings affect your tax rate,” said Nauman Poonja, a CPA and CEO of Accounovation. “If you make $150,000 at your main business and make a side $50,000 by consulting, you might find yourself in higher marginal tax rates than before which can mean some unplanned liability in April.”

4. Marriage Changed the Refund Math

Marriage is one of the most common life events that alters refund outcomes. Borges pointed out that any sizable difference in two spouses’ earnings, for a couple filing jointly, could lead to them overpaying in taxes if they do not adjust their withholding from their “single” rates.

Additionally, Poonja explained that taxpayers who commingle their finances could lose some deductions because of those income-based thresholds.

5. Thinking a Big Refund Means You Came Out Ahead

One of the most persistent refund surprises is that a large refund signals financial success.

Borges stressed that a person’s total taxes will be the same regardless of how much they withhold throughout the year,” and no matter how big their refund.

“If a person’s total tax liability is $10,000, they’re in no better position if they withheld $11,000 and receive a $1,000 refund than they would be if they withheld $9,000 and owed $1,000,” he said.

Moreover, withholding more to get a bigger refund is not a smart money move, but “interest-free loans to the government from overpayments.” Better to keep your own money and invest it, earning compounding interest.

Put another way, Monaco said, “A refund isn’t a bonus — it’s your own money coming back because you overpaid.”

Don’t Wait Until Tax Season To Check the Numbers

Many refund surprises could be avoided entirely just by reviewing withholding and income before tax time, the experts agreed.

“Midway through the year is a great time to review your tax situation,” Borges said. “Compare your most recent paystub to your paystub at the same point from a year prior.”

Or consider doing a review quarterly. Either way, don’t wait until that window between January and April when it’s too late to make changes.

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