The Data You Enter vs. The Data the IRS Uses Are Not the Same

Every tax season, millions of filers become frustrated when the refund amount shown in TurboTax, H&R Block, or other tax software does not match the final refund issued by the IRS. The assumption is that the software “made a mistake.” But in reality, the IRS is not basing your refund on what you entered — it is basing it on what was actually reported to them by employers, banks, and financial institutions.

This is the Software vs. IRS Data Mismatch, and understanding it is key to avoiding surprise refund reductions.

Software Refund Estimates Depend on YOUR Input

When you enter:

• W-2 wages
• 1099 income
• business expenses
• unemployment income
• college tuition
• childcare spending

the tax software assumes you entered it accurately.

The software calculates your refund based on your self-reported figures.

But the IRS does not trust the numbers you enter.

The IRS verifies your data against:

• employer-submitted W-2
• bank-reported interest
• brokerage-reported capital gains
• 1099-NEC contractor income
• 1099-K third-party payments
• SSA Social Security benefits
• retirement distributions
• student loan interest
• tax-reported college 1098-T filings

If their numbers don’t match yours — the IRS wins.

The IRS Uses the REAL Data — Not Your Version of It

Example:

If you enter:
W-2 wages: $46,200

But the employer reported to IRS:
W-2 wages: $47,150

The IRS will calculate your refund based on $47,150 — not your entry — even if the difference was an honest typo.

The same applies to:

• interest
• gig income
• investment earnings
• payroll taxes withheld
• unemployment income
• healthcare credit reconciliation

Software estimates are only as accurate as the inputs you provide.

The Most Common Data Mismatches

1. Missing a W-2

You worked two jobs — you entered one employer, but not the other.

2. Missing 1099 income

Side hustle income on:

• DoorDash
• Uber
• Instacart
• Etsy
• eBay

gets reported to the IRS — even if you forget to enter it.

3. Underreporting interest or dividends

Even $13 of bank interest must be declared.

4. Health insurance mismatch

Form 1095-A does not match Form 8962.

5. Student tuition vs grant mismatch

What you think you paid doesn’t always match what the school reported.

6. Dependents

Claiming a dependent the IRS sees claimed on another return.

What Happens When the IRS Finds a Mismatch

Your transcript may show:

• TC 570 — Refund Hold
  followed by
• TC 971 — Notice Issued
  and possibly
• TC 290 or TC 291 — Tax Adjustment

This means the IRS adjusted your return — and therefore your refund.

Software may have said you were getting:

$3,200

But the IRS approves:

$2,110.

The difference is due to the IRS recalculating using official reported data — not your entries.

The Refund Software Doesn’t Control Your Refund

TurboTax, H&R Block, and others:

• do not issue refunds
• do not approve refunds
• do not verify W-2 data against IRS records
• do not cross-check 1099s

The IRS does.

The software merely simulates — based on the numbers you give it.

Why Tax Software Estimates Often Seem Optimistic

Because the software:

• assumes your income entries are correct
• assumes your withholding is correct
• assumes your credits are valid
• assumes your dependents are eligible

But the IRS often discovers that:

• withholdings were less
• income was more
• credits were not eligible
• or identity verification failed

This is why many taxpayers see a different refund amount than they anticipated.

How to Avoid Refund Surprises

Always wait for all W-2s and 1099s

Don’t guess your earnings.

Use IRS Online Wage & Income Transcript

This allows you to see the exact data the IRS has.

Don’t estimate withheld tax

Use actual paycheck data.

Verify dependent eligibility

Especially in shared custody situations.

When tax software shows an estimated refund, it is a calculation based on your entries, not the IRS-validated figures.

If the final IRS refund is smaller, it’s almost always because:

• something was missing
• something was mis-entered
• something didn’t match official reports

Software estimates are helpful — but they are not guarantees.

The IRS always performs the final calculation.