IRS 2025: three reasons for a smaller refund (or even tax to pay)
Some taxpayers will receive a smaller IRS refund this year, and others may even have to pay tax to the State. The Portuguese Tax and Customs Authority (AT) has clarified the reasons behind these situations in a publication shared on its social networks.
The three causes pointed out by AT
According to the Tax Authority, there are essentially three factors that can explain a less favourable assessment this year.
1. Changes to the withholding tax tables
With less tax withheld at source during the year, taxpayers had more disposable income each month. This effect is then directly reflected in the final adjustment made by the Tax Authority.
2. Moving up a tax bracket
If income increased during last year, the taxpayer may have moved into a higher IRS bracket, which translates into a higher tax burden.
3. Fewer deductible expenses
A lower amount in health, education, housing and other deductible categories directly influences the final tax calculation.
Three withholding tables in a single year
To understand the first point, it is important to recall what happened in 2025. Throughout the year, three different withholding tax tables were in force, following the IRS changes approved mid-year.
- January to July: the first table was in force.
- August and September: a second table was approved by the Government to retroactively reflect the tax relief.
- October to December: a third table was adopted for the final quarter of the year.
Result: many taxpayers paid less tax to the State during the year. That meant more money in their pocket every month, but also a smaller (or zero) refund at the time of the final reconciliation.
What to do if the amount is not what you expected
If the taxpayer believes there is an error in the assessment, they should carefully review their tax return and respective annexes before filing a complaint. It is worth confirming that all expenses were correctly allocated on the Portal das Finanças and that the household composition is properly identified.
In case of doubt, an administrative complaint (reclamação graciosa) can be filed within 120 days from the end of the voluntary payment deadline.
How can Grupo Your help?
Our team supports individuals and companies in reviewing IRS returns, framing deductions and filing administrative complaints. If you have doubts about your tax assessment, talk to us.
Source: Publication by the Portuguese Tax and Customs Authority on Facebook.
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