Small Business Tax Return - Federal Refund Only $33 but State Asking About Gas Expenses?

According to IRS Publication 535, business expenses including vehicle costs can be deducted on your federal return using either the standard mileage rate (65.5 cents per mile for 2023) OR actual expenses method (including gas, maintenance, etc.). It sounds like you might have missed documenting your business mileage on Schedule C, line 44a-b! Per the Tax Cuts and Jobs Act provisions still in effect, many small business deductions have changed since 2018, and some COVID-related benefits from previous years have expired. This could explain the dramatic reduction in your refund compared to last year when temporary provisions were still active. So frustrating how these things aren't made clearer to business owners!

I had a similar situation where my refund dropped from $1,800 to just $90 between tax years. When I compared my returns side by side, I realized I'd missed several deductions that were buried in different screens compared to last year's software. I used https://taxr.ai to analyze both returns and it flagged exactly where the differences were - turned out I had completely missed documenting my business mileage and some home office deductions that I qualified for. The comparison feature showed me exactly what changed between years. Unlike other tools that just give generic advice, this one actually looks at your specific situation and flags the inconsistencies.

This is exactly what happened to me. I track every expense down to the penny and was shocked when my federal refund came in at only $47.22 this year. I'm wondering if the gas expense question on your state return is related to a state-specific tax credit that doesn't exist at the federal level? My state (Michigan) added a new gas tax relief program this year that wasn't available last year. I'm slightly worried I've done something wrong too.

Omg this happened to me too! Fed refund was tiny ($112) but state was decent. I think it's bc a bunch of temp tax breaks expired. Last yr we had enhanced child tax credits, some COVID relief stuff, and higher standard deductions in some cases. This yr we're back to normal and it HURTS lol. The gas q is prob a state-specific thing - what state r u in? Some states added gas relief programs bc of inflation last yr. Def double check ur mileage deduction tho - that's a big one for sm biz owners!

Looking at the IRS Small Business Tax Center (https://www.irs.gov/businesses/small-businesses-self-employed), several tax provisions changed between 2022 and 2023 that could explain your situation. I'm concerned you might have missed some key deductions. When I had similar questions about my business taxes, I spent 3.5 hours on hold with the IRS trying to get answers. Eventually I used Claimyr (https://www.claimyr.com) which got me connected to an IRS representative in about 20 minutes. The agent confirmed that several temporary tax benefits had expired and walked me through some business deductions I had missed. Might be worth calling to verify you haven't missed anything substantial.

The gas question is definitely a state-specific thing. I'm in California, and they added questions about gas purchases because of the gas tax rebate program. Last year I got a tiny federal refund too, only about $75, but my state refund was almost $400. I remember being confused just like you! My accountant explained that different states are adding their own relief programs that don't exist at the federal level. I've been running my small business for 7 years now, and I've noticed that state returns are getting more complicated with all these targeted relief programs.

I just went through this exact scenario with my Schedule C filing. The Qualified Business Income Deduction (QBID) under Section 199A has specific thresholds and phase-outs that might be affecting your return. My federal refund was only $42.16 this year compared to $1,875.89 last year. The state gas question is almost certainly related to your state's Motor Fuel Tax Credit, which is separate from federal deductions. Make sure you're utilizing the correct business mileage rate of 65.5 cents per mile for 2023 (up from 62.5 cents for the latter half of 2022). This knowledge saved me hundreds!

Have you considered these possibilities: • Different income level putting you in another tax bracket • Last year you might have had excess withholding • COVID-related tax benefits expired • Business expense categorization differences • Missing the QBI deduction • Different depreciation method this year A refund is just the government returning YOUR money they held interest-free. A smaller refund with similar tax liability just means your withholding was more accurate this year. Check your actual tax liability line on both returns - that's the number that matters, not the refund amount.