Explain it like I'm 5

My wife and I got married last year

She makes way less money than me as she only works part time and she has been getting a nice return last couple years (we both benefited from this).

I make more and usually I get my money in my paychecks and at end of year get little or owe a little.

We got 3 kids. I usually put 1 dependent down to owe less at end of the year, she puts the other two kids.

But when we looked to file married jointly, we are getting very little money this year - are we doing something wrong?

Should we update our W4s to married?

How should we file?

  1. A refund is what you may possibly receive when you file your income tax return.

  2. You are not doing anything wrong. Your withholding rates are suitably covering your projected tax liability.

  3. If you want to have a higher refund and, in so doing, if you want to have less money come to you with every paycheck in order to obtain said higher refund, by all means update your Forms W-4.

  4. Refunds are not free money.

  5. File using whichever filing status results in the least income tax liability. It is probably (read: 95%+) MFJ, but it might not be, and most preparation software or services make it relatively easy to verify.

You shouldn’t want a larger refund because that just means you over-withheld throughout the year.

Reagan said:
You shouldn’t want a larger refund because that just means you over-withheld throughout the year.

So my now wife has been over withholding last couple years?

Nico said:

Reagan said:
You shouldn’t want a larger refund because that just means you over-withheld throughout the year.

So my now wife has been over withholding last couple years?

Correct. She gave more money to the IRS than she needed to, then they gave it back with 0% interest after she filed her tax return. That’s all a refund is (most of the time. It’s possible for low-income individuals to get “free” money from tax refunds through certain credits. But the vast majority of the time, a refund just means you overpaid. Thus why it’s called a “refund”).

@Pip
I’m pretty sure she was getting a ton of refundable credits and claiming HOH.

Nico said:

Reagan said:
You shouldn’t want a larger refund because that just means you over-withheld throughout the year.

So my now wife has been over withholding last couple years?

Exactly. She loaned money to the IRS.

@Micah
Most likely her refund was almost all from refundable tax credits.

Ben said:
@Micah
Most likely her refund was almost all from refundable tax credits.

But anything she had withheld was too much, right?

Micah said:

Ben said:
@Micah
Most likely her refund was almost all from refundable tax credits.

But anything she had withheld was too much, right?

Yes, but it sounds like she had 2 dependents listed on her W4, and that probably means no federal income tax withheld.

@Ben
She had two dependents and was working a part-time job. She definitely got the tax credits from children and EIC. EIC went away this year with his added income.

Harlem said:
@Ben
She had two dependents and was working a part-time job. She definitely got the tax credits from children and EIC. EIC went away this year with his added income.

Why did the EIC go away? Due to married status or increased income?

@Nico
Likely increased income. I’m just guessing. I have no idea what your family AGI is. But you said significantly more. The EIC phases out at $64k for a family of five.

The question might be, how were you filing? If you lived together, one could have been Head of Household and the other Single. You could split your children any way you wanted. The Head of Household would have been the person who paid more than half the housing costs, which included food and housing, before any subsidies or food stamps. I can see her probably benefitting from EIC and you from Head of Household.

Thanks. So in this case getting married came with a disadvantage… Correct? Since previously she filed Single and got a big return that we both benefited from.

Nico said:
Thanks. So in this case getting married came with a disadvantage… Correct? Since previously she filed Single and got a big return that we both benefited from.

If she was receiving nearly the max amount of Earned Income Tax Credit when she filed single with 2 dependents, then yes, getting married could have led to a lower refund. This is one of the few cases where filing single can be better than married.

If you were filing as Head of Household, then you also lost part of that standard deduction, so that’s another impact.

Nico said:
Thanks. So in this case getting married came with a disadvantage… Correct? Since previously she filed Single and got a big return that we both benefited from.

> got a big return

refund*

Would updating my W4 change anything? Or I can leave my W4 as single and just file taxes end of year as Married Filing Jointly?

Nico said:
Would updating my W4 change anything? Or I can leave my W4 as single and just file taxes end of year as Married Filing Jointly?

Do you want less money each month, and a bigger refund? Or more money each month and not a big refund?

@Ben
I’d rather not have a big refund and get my money in my paychecks throughout the year.