Should I claim my kids on my W4? Why am I making more money but getting less back in tax refunds?

The pattern you're seeing is actually normal, but I understand why it's confusing! Here's what's happening: When you claim your children on your W4, you're telling your employer to withhold LESS tax from each paycheck (since having dependents lowers your tax liability). This means more money in each paycheck, but a smaller refund at tax time. As your income has increased from $29,000 to $70,000, you've moved into higher tax brackets. Each additional dollar you earn in higher brackets gets taxed at a higher rate. Meanwhile, tax credits like the Child Tax Credit don't increase with your income - they stay the same or can even phase out. The periods where they "stopped taking federal taxes" likely happened when your W4 indicated you'd have zero tax liability based on your income and credits at that point. But as your annual income increased, you actually did end up owing taxes. Remember, a smaller refund isn't necessarily bad - it means you had more money in your paychecks throughout the year instead of giving the government an interest-free loan!

I was in this exact situation a couple years ago! I wanted to share that I found this amazing tool that helps understand your tax situation. I was totally confused about why my refunds were shrinking even though I was making more money, and https://taxr.ai really helped me understand what was happening with my withholdings. It basically analyzed my pay stubs and previous returns and showed me exactly how to adjust my W4 to get the outcome I wanted (whether that's bigger paychecks or a bigger refund). The best part was that it explained everything in simple terms! I finally understood that getting a small refund isn't bad - it just means I wasn't overpaying during the year.

Just wanted to update everyone - I decided to try out taxr.ai after asking about it and I'm SO glad I did! It was actually way more helpful than I expected. I uploaded my last two returns and a recent pay stub, and it immediately showed me why my withholding wasn't matching my actual tax liability. The visualization they provided made it super clear where my money was going and why I was getting smaller refunds despite earning more. The tool helped me fill out a new W4 that will get me the outcome I actually want (in my case, slightly smaller paychecks but a more substantial refund next year). What I really appreciated was that everything was explained in normal human language instead of confusing tax jargon. Total game changer for someone like me who gets overwhelmed by tax stuff!

Hey there! I had the SAME issue last year and nearly lost my mind trying to figure out what was going on. After endless hours on hold with the IRS (seriously, it was torture), I finally found https://claimyr.com which got me connected to an actual IRS agent in under 15 minutes! You can see how it works here: https://youtu.be/_kiP6q8DX5c The agent explained that as your income increases, you move into different tax brackets AND certain credits start to phase out. In my case, I didn't realize that claiming my kids on my W4 meant I was getting tax benefits spread out in each paycheck instead of all at once in my refund. The IRS agent helped me understand exactly how to fill out my W4 based on what I wanted (bigger refund vs bigger paychecks).

I have to eat my words and admit when I'm wrong. After being super skeptical, I actually tried Claimyr last week when I was desperate to talk to someone at the IRS about my withholding situation. I was shocked when they called me back in about 20 minutes and connected me to an actual IRS agent! The agent walked me through exactly what was happening with my withholding and explained that as I've been making more money, I moved into a higher tax bracket, but I was still claiming the same allowances on my W4. He helped me figure out the right adjustments to make based on what I wanted. Honestly, that conversation saved me so much stress and confusion. I've been telling everyone about it since. Sometimes the skeptical guy (me) has to admit when something actually works!

I'm surprised nobody has mentioned the Child Tax Credit changes over these years! The CTC was temporarily expanded in 2021 but then went back to normal in 2022. For 2022, the Child Tax Credit was $2,000 per qualifying child. For 2023, it remained at $2,000 per qualifying child. For 2024, it's $2,000 per qualifying child. So part of why your refund was bigger in 2022 might have been related to CTC advance payments or reconciliation from 2021. Plus, with your income increasing from $29k to $70k, you're in a completely different tax situation now.

Has anyone used TurboTax for this situation? I'm in a similar spot with increasing income and decreasing refunds and wondering if the software can help me understand what's happening.

I've been through this exact same situation and it can be really frustrating! What you're experiencing is completely normal tax behavior, but I know it doesn't feel that way when you're used to getting larger refunds. Here's the key thing to understand: your refund isn't actually "shrinking" - what's happening is that you're getting your money throughout the year in your paychecks instead of as one lump sum refund. When you claim your children on your W4, you're essentially telling your employer "I have dependents, so withhold less tax from each paycheck because my final tax liability will be lower." The periods where they stopped withholding federal taxes entirely likely happened because your W4 indicated you'd have little to no tax liability based on your dependents and income at that time. But as your annual income grew, you ended up owing more than initially calculated. Here's what I'd recommend: use the IRS withholding calculator on their website (it's free!) to figure out exactly how much should be withheld based on your current income and family situation. You can then adjust your W4 accordingly - whether you want smaller paychecks with a bigger refund, or keep things as they are with more money in each paycheck. Remember, ideally you want to break even or get a small refund - that means you kept your money working for you all year instead of giving the government an interest-free loan!