Why did my college student dependents suddenly get almost nothing back on taxes this year?

Thanks for this explanation! This makes a lot of sense. They've had the same jobs for a couple years with similar income, so I was surprised by the sudden change. Maybe the payroll system changed how they calculate withholding?

Intersting, I wonder if they earn more this year? Even small increases can push into different tax brackets or affect other calculations. Did they have any other income sources, like investment income or gig work?

No other income sources - just their regular part-time campus jobs. Their hours and pay are pretty similar to last year, maybe a small raise but nothing dramatic.

Actually, there were some adjustments to withholding tables. The IRS slightly modified them and sometimes employers implement changes differently. Have them fill out new W-4s and maybe check the box for extra withholding if they want to avoid owing next year.

Sounds interesting. How exactly does it work? Does it just read your transcript or does it do more?

It does WAY more than just read the transcript. It analyzes all the codes and entries, explains what they mean specifically for YOUR situation, and shows exactly how calculations are working. For dependents specifically, it showed me how the different deduction rules were applied and why the refund was so much smaller than expected. Life changing tool honestly!

Holy crap I just tried this and it's incredible! It showed me exactly why my son's refund was different this year and explained all the dependent rules I never understood. Why isn't everyone using this?? Thanks for sharing - I'm telling everyone in my family about this now!

another tax tool? 🙄 does it actually help or is it just pulling the same info we can get from the irs website

It's pulling the same data but the difference is in what it DOES with the data. The IRS just gives you a bunch of codes and numbers. This actually explains everything in plain English and shows you exactly what's happening with the calculations. Total game changer.

Wait, there's actually a way to talk to a real IRS person without waiting all day? Is this legit?

Yes! It's the only thing that actually worked after trying for weeks to get through. The app basically waits on hold for you and calls when it gets an agent. Talking to the agent directly was the only way I finally understood what was happening with the dependent thing. Best investment ever considering how much time I wasted trying to figure this out myself.

I'm skeptical... I've tried everything to reach the IRS. How much does this cost?

Trust me I was skeptical too after all the dead ends. I don't remember the exact cost but it was absolutely worth every penny to finally get answers. My kid was literally about to change majors from the stress of thinking he did something wrong on his taxes 😂 The peace of mind from talking to someone who actually knew what they were talking about was priceless.

Exactly! It's weird how it suddenly changed when nothing on their end changed. Did you figure out why it happened for your daughter?

Not really. We just paid the small amount and moved on. But now im curious after seein your post. Let me know if you figure it out!

My son had the same issue and he was FURIOUS thinking the school payroll messed up. Turns out the withholding tables changed a bit this year and it affected dependent workers differently. They need to update their W-4s and check the box for additional withholding if they don't want to owe next year.

Thanks - that might be it. Do you know what the threshold is? They did get small raises, but nothing dramatic.

For 2024, dependent standard deduction is the greater of $1,300 or their earned income plus $400, up to the regular standard deduction. But honestly just the way taxes are calculated and withholding is done for part time workers means even a tiny raise can have effects. Especially since they arnt getting the full standard deduction.

Lol facts. I literally got different answers calling 3 different times. 🤮

This isn't actually helpful to OP's question though...

Actually it is. The answer is there is no logical answer because the tax system is a mess and changes are poorly communicated. The point is you can't expect consistency year to year even with the same circumstances.

Fair enough. You're not wrong. 💯

Good point! I helped them both file and we definitely checked the "can be claimed as dependent" box, so that's not it in our case.

What tax software did they use? Sometimes changing from one system to another can cause differences in how certain calculations are done.

We've used TurboTax for all of us the past few years.

They don't have investments, but they do have small savings accounts. Maybe interest rates being higher this year pushed them over some limit? Would a couple dollars of interest really make that much difference?

Interest rates have increased substantially, so even small accounts could be generating more taxable income. For dependents, unearned income (like interest) has special taxation rules. Even small amounts can trigger different calculations. Might be worth looking at Schedule B if they had one.

This is a good point - education credits can make a big difference. But those would show up on the parent's return not the student's if OP is claiming them as dependents.

Oh yeah thats true. forgot about that part. still worth checking tho!

They're 19 and 21, so that's not it. But good thinking!

Is this actually useful? Seems like it would just tell you what the IRS site already shows.

Completely different experience. IRS site just gives you raw data with zero explanation. This actually breaks down the entire calculation process, explains each code, and tells you specifically what happened in comparison to previous years. For dependents especially it shows how the different rules are applied to their income. I was shocked at how good it was.

did the agent explain why it changed this year specifically? seems weird if the tax laws didnt change

Yeah, she explained that the withholding tables get adjusted periodically even without major tax law changes. This year's adjustment had a bigger impact on part-time workers claimed as dependents. Something about how the calculation smooths out withholding over the year assuming full-time work, but for part-time dependent workers it ends up underwithholding. Most helpful conversation I've ever had about taxes honestly.

How long did it take to get someone on the phone with this?

The app did all the waiting for me. I think it was about an hour and a half total but I was able to go about my day until they called to connect me. Way better than sitting on hold for hours manually dialing and redialing.