Average IRS refunds are running lower so far this filing season, and the drop is catching many households off guard. The smaller checks reflect a mix of new law changes and paycheck withholding tweaks that are hitting some groups harder than others. The people most likely to see their refund shrink are those whose withholding shifted during the year or whose go-to credits are no longer as generous.
Recent Tax Law Changes Shrinking Refunds
Several filers are discovering that a familiar income and similar deductions now produce a smaller refund because the tax rules themselves have moved. The Primary IRS has explained that Rev. Proc. 2024-40 was modified to reflect amendments by Public Law 119-21, also called the One, Big, Beautiful Bill Act, which adjusted brackets, deductions and credits. In the same technical update, the agency noted that the standard deduction is set to rise 2.5 percent for 2025, which changes how much income is shielded from tax and can subtly alter refund math even when paychecks look the same.
Those shifts interact with paycheck withholding in ways many workers do not see until they file. In its broader inflation-adjustment guidance, the Rev Proc. 2024-40 update shows how bracket thresholds move, which can push more income into higher rates if withholding was not recalibrated. At the same time, an IRS newsroom release reminds taxpayers that federal income taxes are pay-as-you-go, and that proper withholding is key to avoiding either a surprise bill or an outsized refund. When law changes reduce certain credits or adjust brackets without a matching tweak to W-4s, the result is often a smaller check at filing time.
Workers with Multiple Jobs or Spouses
People juggling more than one job or living in two-earner households are high on the list of those seeing smaller refunds. The Primary IRS explains in Publication 505 that wage withholding is calculated separately for each job, using the information on that employer’s Form W-4. When a worker or their spouse has multiple jobs, each employer may withhold as if that job is the only source of income, which can lead to either over-withholding or under-withholding once the incomes are combined on a joint return. That mismatch often shows up as a reduced refund or an unexpected balance due.
The mechanics sit inside the withholding tables that employers use. Publication 15-T, which the Primary IRS describes as the wage bracket and percentage method guide, spells out how payroll systems translate Form W-4 entries into tax withheld. If both spouses mark similar entries without coordinating, the tables in Form 15-T can generate too little withholding for the household’s combined income. The IRS tax withholding estimator also flags that its results may be less reliable when a worker expects more than 10,000 dollars in overtime, tips or other variable pay, which is common in service jobs that rely on multiple income streams.
Self-Employed and Non-Wage Income Earners
Self-employed workers and people who rely heavily on non-wage income are also likely to see smaller refunds or even penalties if their estimated payments lagged behind their actual earnings. In Publication 505, the Primary IRS explains that those with income from interest, dividends, capital gains, rents or royalties, or with self-employment income, often need to make quarterly estimated tax payments when wage withholding is not enough. The same guidance notes that taxpayers can owe an underpayment penalty even if they qualify for a refund at filing, because the law looks at whether tax was paid throughout the year rather than just at the end.
Operational issues can compound the hit. The Taxpayer Advocate Service, described as an independent organization within the IRS, reports in its TAS metrics that a share of returns are delayed or suspended for additional review, often because of income mismatches or questions about credits tied to self-employment and non-wage income. According to the same IRS-linked report, those operational causes affect about 5 percent of filings, which can slow refunds for the very households that already face more complicated estimated tax calculations.
Those Who Updated W-4 to Reduce Withholding
Some filers will see smaller refunds this year precisely because they asked for more money in their paychecks. The Primary IRS describes Form W-4 as the governing document that tells employers how much federal income tax to withhold, and it explicitly recommends updating the form after major life changes such as marriage, divorce or a new job. Many workers also revise their W-4 to reduce withholding when they feel that prior refunds were too large, effectively trading a spring windfall for higher take-home pay during the year.
How large that trade-off becomes depends on the mechanics in the withholding tables. The Form 15-T wage bracket and percentage method shows how employers calculate tax from each paycheck using W-4 data, and the IRS has highlighted examples where a modest change on the form yields a refund that is 10 to 15 percent smaller. When workers adjust W-4 entries to cut withholding without revisiting the calculation later in the year, they often discover at filing that the smaller refund is larger than they expected, especially if overtime or bonuses increased their actual tax liability.
Early Filers and Credit Claimants
Early filers are among the first to notice that average refunds look weaker, especially at higher income levels. The Primary IRS weekly filing-season snapshot for the week ending February 7, 2025, shows total refunds issued and an average refund that trails last year’s early-season figure, with the agency cautioning that the numbers tend to even out as more returns arrive. Coverage that ties those IRS data to filing patterns has found that high-income households often file early and claim fewer refundable credits, which can pull the early average down compared with later weeks when more credit-heavy returns come in.
Refunds for many low and moderate income families have also fallen because pandemic-era expansions of key credits have lapsed. Reporting from NPR and analysis by the Institute on Taxation and Economic Policy show that temporary boosts to the Earned Income Tax Credit and Child Tax Credit have expired, and the child and earned income credit expansions that once raised refunds are no longer in place. Those changes, according to that research, have reduced average refunds by roughly 200 to 500 dollars for some families with children, which helps explain why many credit claimants perceive this season’s refunds as sharply smaller.
How to Avoid a Smaller Refund
Tax law and IRS operations are largely outside any individual filer’s control, but paycheck withholding is not. The agency’s own IRS newsroom guidance urges taxpayers to check withholding during the year rather than waiting until filing season, stressing again that the system is pay-as-you-go and that a midyear adjustment can prevent both big balances due and unexpectedly small refunds. That same release frames refund size as a choice about timing, not a measure of whether someone paid the right amount of tax overall.
For workers who want to calibrate that choice, the tax withholding estimator on the Primary IRS site is the main online tool. The agency explains that this estimator shows how different W-4 entries and income scenarios affect expected refunds or balances, but it also warns that the tool is not fully updated for certain provisions and should not be used in some situations, including when a person expects more than 10,000 dollars in tips or overtime. Publication 505 from the Also IRS adds that those with significant non-wage income may need to pair W-4 changes with estimated tax payments, since withholding alone may not be enough to avoid penalties or refund surprises.
What the Data Shows Overall
Stepping back from individual stories, the IRS data point to a broad pattern of slightly smaller refunds, especially for lower and middle income filers. The Primary IRS filing-season statistics hub, which organizes returns by AGI and other variables, shows in its dataset that average refunds for AGI under 50,000 dollars are down about 3 percent compared with a recent baseline. While the tables are not a weekly snapshot, they give a clearer view of how refund amounts vary by income group and how changes in credits and withholding behavior ripple through the system.
Weekly snapshots help fill in the timing story. The Supports filing-season report for early February shows an average refund around 1,800 dollars compared with a higher figure at the same point a year earlier, and the IRS again notes that early averages can move as more returns are processed. Coverage by CNBC and other outlets, drawing on the same IRS data, has highlighted that refunds are down around 3 percent for AGI under 50,000 dollars and that the mix of early filers skews the initial numbers. Additional reporting, such as CNBC pieces on common filing mistakes and an Oregon-focused reminder that some residents still have an average of 781 dollars in unclaimed refunds, suggests that many households are not only facing smaller checks but also leaving money on the table. Together, the data and the law changes indicate that workers with multiple jobs, self-employed filers, those who trimmed withholding and families that once relied on expanded credits are the most likely to see their refunds shrink this year.
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*This article was researched with the help of AI, with human editors creating the final content.
Julian Harrow specializes in taxation, IRS rules, and compliance strategy. His work helps readers navigate complex tax codes, deadlines, and reporting requirements while identifying opportunities for efficiency and risk reduction. At The Daily Overview, Julian breaks down tax-related topics with precision and clarity, making a traditionally dense subject easier to understand.
