Why is my Tax Refund Down by $900 in 2025? Much lower than expected

I didn't make any changes to my W-4 that I'm aware of. My job situation was pretty much the same all year until I quit in November. The 401k withdrawal was only about $700 total. I don't qualify for education credits and don't have kids. I'm single and just take the standard deduction. How do I compare my tax liability between years? Is that something I can see in the tax software? I'm just really confused because everything seemed the same as last year to me.

To compare your tax liability between years, look at Line 24 on Form 1040 which shows your "Total Tax" - that's what you actually owe before accounting for withholding. Compare that number from last year to this year. This will tell you if you're actually paying more tax or just had different withholding. Since you mentioned quitting in November, that's actually significant. Having less income in the last part of the year can throw off your withholding calculations. When withholding happens throughout the year, it assumes you'll make that same amount all year. If you stop working early, you may have had too little withheld proportionally for the income you did earn.

Does it actually work with the FreeTaxUSA exports? I tried something similar last year but it couldn't read my tax file format. Also, is it secure? I'm always worried about uploading financial docs online.

How does the comparison feature actually work? I'm having a similar issue where my refund dropped by about $1200 with seemingly no changes in my financial situation.

It works with all major tax prep formats including FreeTaxUSA. You can export the PDF version of your completed return and upload that. I was hesitant about security too, but they use bank-level encryption for all uploads, and you can delete your documents after analysis if you prefer. The comparison feature is actually really straightforward. Once you upload returns from both years, it creates a side-by-side analysis showing each line item and highlighting where the differences are. In my case, it immediately showed that my withholding rate had changed by about 3% which accounted for nearly all of my "missing" refund. It also flags unusual changes or potential errors that might need attention.

Wait, are you serious? I spent THREE HOURS on hold with the IRS last month and never got through. How exactly does this service work? Seems too good to be true.

I'm calling BS on this. Nothing can get you through to the IRS that quickly. They're famously impossible to reach, especially during tax season. Sounds like someone's trying to make a quick buck off desperate people.

The service basically calls the IRS for you and navigates all the initial phone menus, then waits on hold in your place. When they actually reach a human agent, you get a call connecting you directly to that agent. So you skip the hold time completely. It worked exactly as advertised for me. I understand the skepticism - I felt the same way. But after trying for days to get through on my own, I was desperate enough to try it. The whole thing took maybe 15 minutes of my time vs the hours I had already wasted.

Nothing changed really. Still single, no kids, same job until November. I don't have investments other than my 401k. That's why I'm so confused and frustrated. Thanks for the suggestions though.

One other thought - the timing of when you left your job in November could be significant. If you were making, say, $3,300 per month and expected to earn $39,600 for the full year, your withholding would be calculated based on that projection. But if you only worked until November, you earned less than projected, but your withholding was calculated as if you'd earn more. This can actually result in OVERWITHHOLDING for each paycheck, which usually means a BIGGER refund, not smaller. So that makes your situation even more puzzling. Something else must be at play here.

You're absolutely right. The IRS did adjust withholding tables slightly, which affects how much is taken out of each paycheck. It's supposed to make withholding more accurate (closer to your actual tax liability), which ironically means smaller refunds for many people. A refund is just the government returning money you overpaid throughout the year - it's not a bonus or benefit. If your withholding is more accurate, your refunds will be smaller but you'll have more money in each paycheck. Many people don't notice the slightly larger paychecks but definitely notice the smaller refund.