February 28, 2026

Why Your Refund Looks Different This Year (Even If Nothing Changed)

My office at Welgaard sits directly next to our reception desk during tax season.

All day long, clients come in to sign their returns. And without fail, we hear a familiar phrase from clients:

“Nothing changed… so why do I owe this year?”
“Why is my refund so much smaller?”

If you’ve had that reaction, you’re not alone. It’s easily one of the most common phrases of tax season.

And here’s what I can tell you from that front-row seat:

In most cases, nothing dramatic changed.

But small things did.

And in tax world, small things matter.

First — Let’s Reset the Goal

Before we talk about what changed, let’s talk about expectations.

The goal is not to receive a giant refund every year.

A large refund simply means you paid in more than you needed to throughout the year and waited to get it back. In other words, you gave the government an interest-free loan.

A better target is:

• Owing zero
• Or being very close to zero

That means your withholding was accurate.
That means you kept your money in your pocket all year instead of waiting for a refund check.

So when someone says, “My refund is smaller this year,” that doesn’t automatically mean something went wrong.

It may actually mean things were more accurate.

So Why Does It Feel So Different?

When someone owes unexpectedly, it feels confusing. Especially when life feels stable.

But here are the most common things people overlook.

1. Investment Income Often Creeps In

Did your investments perform better this year?

That’s good news financially — but it can create taxable income.

Interest.
Dividends.
Capital gains.

Even if you didn’t sell anything intentionally, brokerage accounts and mutual funds generate income behind the scenes. You may not feel like you “made” that money because it stayed invested, but the IRS counts it as income.

Sometimes it’s just a few thousand dollars. But that can be enough to change the outcome at filing.

2. “Nothing Changed for Me” — But What About Your Spouse?

I hear this often:

“Nothing changed for me.”

Okay — but what about your spouse?

• Did they receive a bonus?
• Switch jobs?
• Adjust their W-4?
• Pick up overtime?
• Change retirement contributions?

Taxes are calculated on the household total, not individually.

Sometimes one spouse stayed steady, but the other had small changes that shifted the overall picture just enough to reduce a refund or create a balance due.

3. Small Income Shifts Add Up

It doesn’t take a dramatic raise to change your tax return.

Common examples:

• Overtime
• Bonuses
• Side income
• Higher interest earnings
• Retirement distributions

You may not feel significantly different financially, but crossing certain income thresholds can:

• Reduce credits
• Phase out benefits
• Increase total tax

The tax code operates in brackets and thresholds. A modest increase can quietly change how certain credits apply.

Our Favorite Tool: The Two-Year Comparison

When clients are genuinely puzzled, one of the most helpful tools we use is our two-year comparison worksheet.

Side by side, we review

• Income line by line
• Withholding amounts
• Investment income
• Credits
• Total tax

Nine times out of ten, the answer is sitting right there.

Sometimes it’s a $4,000 bonus.
Sometimes it’s $1,200 of unexpected dividends.
Sometimes it’s slightly lower withholding from payroll.

It’s rarely mysterious.

It’s usually just math that wasn’t visible during the year.

And once you see the numbers side by side, it clicks.

When Owing Feels Wrong

If your balance due feels unexpected or unusually high, the usual culprits are:

• Withholding tables that didn’t adjust properly
• Dual-income households not withholding enough
• Credits that phased out
• Investment income that wasn’t anticipated

Again — nothing dramatic.

Just a collection of small shifts that add up.

The Bigger Picture

A refund is not a scorecard.

Owing does not mean you failed.

It simply reflects how close your payments during the year matched what you actually owed.

If you were close to zero, that’s typically a win.

If you were surprised, that’s not a failure either. It just means we may want to review your withholding or talk through planning adjustments for the current year.

The best time to fix next year’s refund is not next April.

It’s now.