You don't have to file your taxes to find out whether you'll get a smaller refund this year

Flickr/Thomas BonteH&R Block also has a completely free option for filing your taxes.

H&R Block is one of the most popular services for filing your taxes online. I used H&R Block to file my taxes last year and again this year – the process was simple and I received my refund within two weeks of submitting my return.

But you don’t have to wait until you file your tax return to estimate your refund.

President Donald Trump signed the Republican tax bill into law at the end of 2017, and this is the first tax season to observe the new tax brackets, which could change the size of your refund.

According to IRS data, the average federal tax refund amount is down about 8% – to $US1,865 – for the first week of the 2019 filing season compared to the same window last year. The total number of refunds issued dropped by 24%.

While many Americans rely on the windfall from a tax refund, financial experts say a larger or smaller refund is not indicative of whether a person paid more or less in taxes, but rather of the amount withheld from their paycheck. Receiving a smaller refund doesn’t necessarily mean you had a higher tax bill this year than before the new tax law was enacted, Business Insider’s Bob Bryan explained.

Read more: Democrats claim the decline in Americans’ tax refunds is proof the GOP tax law screwed over the middle class – but the truth is more complex

If you have your W-2 handy, it will take less than five minutes to estimate your tax refund (or tax bill, if you owe money) using H&R Block’s free online tax calculator. You begin by answering a few questions about yourself: your marital status, age, number of dependents, and whether you have health insurance.

The next section, titled “income,” is where your W-2 comes in.

These are the only three numbers you’ll need from your W-2:

  • 2018 total wages (box 1 on your W-2)
  • Federal income taxes withheld (box 2 on your W-2)
  • State income tax (box 17 on your W-2) – you can ignore this one if your state doesn’t tax income
Hr block refund calculatorH&R Block

After entering those figures, you’ll answer a few more quick questions about whether you own a home, have children, or expect to claim any other deductions or tax credits.

And then your tax refund estimate will appear:

Hr block tax refund calculatorH&R Block

Once you’re ready to actually file your taxes, the IRS recommends e-filing and requesting direct deposit for your refund, which should show up in your account within 21 days.

Popular online tax services like TurboTax and H&R Block are easy to use, even for tax novices. Many online tax services offer the option to file for your federal taxes – and sometimes state taxes – for free if your income was less than $US66,000 in 2018. Some services, including H&R Block, have no income restrictions to file for free. You can check your options using the IRS Free File Lookup tool.

A smaller refund could mean you had a bigger paycheck throughout the year

The tax law instituted new guidelines for how much employers should withhold from employees’ paychecks for taxes, resulting in an increase in take-home pay for about 90% of Americans, Business Insider’s Bob Bryan reported.

Employees who didn’t adjust their withholdings after the new guidelines were released could be receiving a smaller refund than they expected this year, Mark Jaeger, the director of tax development at TaxAct, told Business Insider.

“Depending on a filer’s tax situation, they may not get as large of a refund this year as they’re used to if they didn’t adjust their withholdings in 2018. That said, they shouldn’t immediately be alarmed if that’s the case,” Jaeger said.


Read more:
Financial experts say there’s no reason to panic if your tax refund is smaller this year

“Many filers received a boost in their paychecks throughout 2018; that’s where the remaining amount of their refund went,” he said. “Instead of waiting to receive their money as a tax refund, they received it all year long.”

Big tax refunds generally mean you paid too much in taxes – you had too much income tax taken out of each paycheck, and now the IRS is returning what is rightfully yours. Instead of keeping your money in a savings or retirement account where it could earn interest all year, you essentially gave an interest-free loan to the government, Business Insider previously reported.

As Business Insider’s Lauren Lyons Cole, a certified financial planner, said, “I always try to either owe slightly or break even when filing my tax return.” A tax refund of zero means you optimised your income throughout the year, putting yourself in the best possible position to increase your net worth, she said.

Business Insider Emails & Alerts

Site highlights each day to your inbox.

Follow Business Insider Australia on Facebook, Twitter, LinkedIn, and Instagram.