Should I claim my kids on my W4? Why am I earning more but getting less tax refund?

What you're experiencing is actually normal tax behavior as your income increases. There are a few key things happening here: First, as your income rises, you move into higher tax brackets, which means more of your money is taxed at higher rates. The US has a progressive tax system, so different portions of your income are taxed at different rates. Second, the child tax credit has income phase-out thresholds. As your income increases, you may be receiving less of the full credit amount, which would reduce your refund. Third, when you claim dependents on your W4, the IRS adjusts your withholding to try to match your expected tax liability. But if your income increases significantly mid-year (like with your promotion), the withholding calculations may not adjust perfectly. The federal withholding stopping during the year suggests you might have reached the Social Security tax cap OR there was an error in your W4. This definitely needs to be checked.

After struggling with similar withholding issues last year, I found this amazing tool called taxr.ai (https://taxr.ai) that helped me understand exactly what was happening with my paychecks and withholding. I uploaded my pay stubs and tax documents, and it analyzed everything to show me why my withholding wasn't keeping pace with my income increases. The really helpful part was that it showed me exactly how to fill out a new W4 that would properly account for my higher income and prevent the withholding issues. It explained everything in plain English instead of confusing tax jargon.

I was super skeptical about taxr.ai at first, but I tried it after my recent promotion and I'm so glad I did! My situation was almost identical to yours - I kept getting smaller refunds despite making more money, and sometimes my federal withholding would just stop. The tool showed me I had my W4 set up all wrong for my new income level. Apparently when you make more money, claiming dependents on your W4 affects your withholding differently. I followed their suggestions for updating my W4 and submitted it to HR. My last three paychecks have had the correct withholding amount, and their tax simulator shows I'll be on track for the refund amount I prefer instead of owing money next year. If you're seeing withholding stop during the year, definitely check this out because that's not supposed to happen with regular income tax!

Speaking from experience, the sudden drop in tax refunds is frustrating! I had the same issue and spent WEEKS trying to get through to the IRS for an explanation. Always busy signals or disconnects after waiting forever. I finally used Claimyr (https://claimyr.com) to get through to an actual IRS representative. You can see how it works here: https://youtu.be/_kiP6q8DX5c. The service basically holds your place in the IRS phone queue and calls you when an agent is ready. The IRS agent reviewed my withholding history and confirmed I had a withholding calculation error that was causing the federal withholding to stop after I reached certain income thresholds. This wasn't supposed to happen! They walked me through exactly how to correct my W4 to prevent this in the future.

I need to eat my words about Claimyr. After posting my skeptical comment, I decided to try it myself since I've been trying to reach the IRS for 3 weeks about a similar withholding issue. I was completely shocked when I got a call back in about 45 minutes saying they had an IRS agent on the line. After going through identity verification, I spoke with an incredibly helpful IRS representative who explained that my W4 had been processed incorrectly after my last promotion. The agent confirmed what others here are saying - when your income increases significantly, the way dependents affect your withholding changes dramatically. They helped me calculate the correct withholding for my new income level and sent me documentation I could give to my payroll department. For anyone struggling with withholding issues after an income increase, actually speaking with the IRS saved me thousands in potential tax surprises.

The main thing nobody's mentioned is tax brackets. Your refund gets smaller as you make more because: 1. At $28.5k with two kids and HOH filing, you were probably in the 12% bracket and got FULL child tax credits plus earned income credit 2. At $51k, you lost some earned income credit and might be hitting the 22% bracket 3. At $69k, you're definitely in the 22% bracket and losing more credits It's not that you're doing anything wrong - the system is designed this way! As you make more, you keep less of each additional dollar.

Has anyone noticed that the OP's refunds seem unusually large? $18,000 refund on $28,500 income seems really high. I'm wondering if there were some special tax credits in play during those years?

For the specific question of "Should I claim my kids on my W4" - YES, you should still claim them. The issue isn't whether to claim them but HOW you claim them on the new W4 form. The W4 form changed significantly in 2020. It no longer uses "allowances." Instead, for children, you need to: 1. Check the box in Step 2(c) if you have more than one job 2. In Step 3, enter the amount of the Child Tax Credit you expect to qualify for As your income rises, you may not qualify for the full child tax credit, so you'll need to adjust Step 3 accordingly. This is probably why your withholding got messed up - the old W4 calculations don't work well with the new system, especially when your income changes significantly.

This is a really comprehensive discussion! I just want to add one more perspective as someone who went through a similar situation recently. The combination of income increases and the end of pandemic-era tax credits creates a "perfect storm" for shrinking refunds. What helped me was thinking about it differently - instead of focusing on the refund amount, I started tracking my effective tax rate and total tax liability. When I calculated it out, even though my refunds got smaller, my actual tax burden as a percentage of income stayed reasonable. The key insight was that those large early refunds were essentially interest-free loans I was giving to the government. Now I aim for a smaller refund (around $1,000-2,000) by adjusting my withholding. This way I keep more money in my paycheck throughout the year instead of waiting for a big refund. The IRS Withholding Estimator tool mentioned by others is invaluable for this - I update my W4 every time my income changes significantly. One last tip: if you're still confused after using online tools, consider consulting with a tax professional for one session. They can review your specific situation and help you set up withholding that works for your income trajectory.