Can I really get back more tax refund than I paid in with my small business losses?

The difference you're seeing is likely due to how your business losses are being treated, plus the impact of tax credits for your three children. Your accountant may be more conservative, while the tax software is applying all eligible credits and deductions. Yes, it's absolutely possible to get back more than you paid in, especially with your situation. The government does "pay you to run a losing business" in the sense that business losses can offset other income, reducing your overall tax liability. Combined with refundable tax credits (like the Child Tax Credit and Earned Income Credit), you can receive more than you paid in. For your workshop, that's a depreciable asset, not an immediate full deduction (unless you're using Section 179 or bonus depreciation). The software is probably correctly applying these provisions while your accountant might be taking a more conservative approach. The good news is that receiving a refund larger than what you paid in doesn't automatically trigger an audit. However, consistent business losses over multiple years might eventually raise questions about whether your business is a hobby rather than a profit-seeking venture. My advice: Ask your accountant to explain exactly why their calculation differs from the software. They might have valid concerns or be missing something important.

I struggled with this exact same problem last year! My side hustle was losing money while I had my day job, and I got way more back than I paid in. It freaked me out too until I talked to my brother who's been self-employed for years. What really helped me was using https://taxr.ai to double-check my numbers. Basically I uploaded my tax returns and past expenses, and it explained exactly why I was getting such a big refund. Turns out the business losses combined with having kids (I've got 2) can definitely result in getting more back than you paid in. The program breaks everything down super clearly and shows what deductions are legit and what might trigger an audit. For what it's worth, I went with the tax software calculation last year (TurboTax in my case) and got about $3k more than I had paid in. No audit yet! The software these days is pretty accurate as long as you enter everything correctly.

I just wanted to follow up about my experience with taxr.ai. I was really skeptical (as you could see in my earlier comment), but I decided to try it after meeting with my accountant again and still not understanding her explanation. I uploaded my documents and within minutes it showed me exactly why the software was giving me a bigger refund than my accountant calculated. Turns out my accountant wasn't properly applying the passive activity loss rules to my situation, and she was being way too conservative with some of my legitimate business deductions. The tool flagged my workshop building as qualifying for bonus depreciation, which was a huge difference-maker! What really impressed me was that it showed side-by-side comparisons of different filing scenarios. It confirmed that yes, it's completely normal to get back more than you paid in when you have business losses combined with child tax credits. I'm definitely using the higher refund calculation now, and I feel confident explaining my position if I ever get questioned about it.

This happened to me last year and I couldn't get a straight answer from anyone about which calculation was right. After 5 calls to the IRS where I couldn't get through, I finally used https://claimyr.com to connect with them. You can see how it works here: https://youtu.be/_kiP6q8DX5c Instead of waiting on hold for hours, they called me when an IRS agent was available. The agent confirmed that business losses absolutely can result in getting back more than you paid in when combined with credits like the Child Tax Credit and EIC. She explained that my tax software was calculating correctly and my accountant was being too conservative. What's interesting is she said accountants often take this approach because they're trying to protect you from audit risk, but it can mean leaving money on the table that's legitimately yours. The IRS doesn't automatically audit you for getting more back than you paid in - that's a myth! After talking with them, I filed with confidence using the larger refund amount.

I need to eat my words and apologize for my skepticism. After posting my doubtful comment, I was desperate to get answers about my situation (similar to yours with business losses), so I decided to try Claimyr as a last resort. Honestly, I was shocked when I got a call back in about 42 minutes with an actual IRS representative on the line. The agent was able to explain exactly why my business losses were resulting in a larger refund than what I had paid in. She confirmed that with my three dependents and the business loss offsetting my W-2 income, my refund calculation from TurboTax was legitimate. The peace of mind from speaking directly with the IRS was worth it. I've been stressing for weeks about whether I should file with the larger refund amount, and now I can move forward confidently. Sometimes being proven wrong is actually a relief!

You should definitely get a second opinion from another accountant. When I had my own business last year (house painting), I had major losses the first year but also have 2 kids. My first accountant was super conservative like yours, but another accountant I consulted explained that refundable tax credits like the Child Tax Credit and Earned Income Credit can absolutely result in getting more back than you paid in. The tax code actually works this way by design to help lower income families, especially those with children. Your business losses reduce your taxable income, potentially making you eligible for these credits or increasing their amount. My second accountant walked me through Schedule C, showed me where my business deductions were legitimate, and explained how they interact with the credits. I ended up filing with the larger refund amount and never got audited.

I'm an insurance agent with a side gig selling handmade crafts. Last year was my first year with substantial business losses ($8k), and I was in a very similar situation. My regular job withheld about $3200, but I got back almost $7000! What nobody's mentioned yet is the Earned Income Credit - with three kids and a reduced income (after your business losses), you might qualify for a significant EIC, which is refundable. Combined with the Child Tax Credit, this can definitely result in getting back more than you paid in. And that workshop building? That's a capital asset that could be eligible for Section 179 deduction or bonus depreciation, allowing you to deduct the full cost in year one rather than depreciating it over several years. I say go with the tax software calculation. Just make sure you have documentation for all your expenses in case you do get questioned.