Why did my income increase by $10K but they took out less in taxes this year?

I'm totally confused about my tax withholding this year and hoping someone can explain what's happening. Last year my gross income was $58,000 and my state withholding was $6,412. This year I actually made about $12k more, so around $70,000, but they somehow took OUT LESS in taxes ($6,310)! My tax refund is usually around $1,600-1,900 but this year it's saying I'm only getting back $385. I didn't change anything on my tax forms - I always have them take out the maximum amount because I prefer getting a refund rather than owing. So I'm completely confused why they would take out less if I made more money? I mean, I'm grateful to be getting any refund at all, but I've kind of been counting on getting at least $1,600 every year and now I'm trying to figure out what happened. Did tax laws change? Did my employer mess something up? Am I completely misunderstanding how withholding works? Any insights would be really appreciated!

0 coins

18 comments

Ally Tailer

•8M

What you're experiencing is actually pretty common and there could be a few reasons for this. Tax withholding isn't just based on how much you make - it's based on a combination of your income, filing status, and the current withholding tables that employers use. The IRS adjusted the withholding tables in recent years, which might explain why less was withheld despite your higher income. Additionally, if your income increased throughout the year (maybe you got a raise halfway through?), the withholding calculations might not have caught up properly. Another possibility is that you hit a different tax bracket with your increased income, which changed how your taxes were calculated overall. The higher your income, the more precise your withholding needs to be to get that big refund you're used to. If you want to increase your refund for next year, you might want to fill out a new W-4 form and either increase your withholding or add a specific additional amount to be withheld from each paycheck.

0 coins

Ally Tailer

•8M

Yes, a midyear promotion can definitely impact your withholding calculations! When your income suddenly increases, the payroll system calculates withholding as if you'd been making that higher amount all year, which can lead to underwithholding for your actual annual total. Unfortunately, you can't change withholding for taxes you've already filed. The best approach is to adjust for next year by submitting a new W-4 to your employer. You can either select fewer allowances or specify an additional dollar amount to withhold from each paycheck. The IRS has a tax withholding estimator tool on their website that can help you figure out the right amount.

0 coins

Aliyah Debovski

•8M

I went through almost the exact same situation last year with my tax return being WAY smaller than I expected. After hours of frustration, I finally found taxr.ai (https://taxr.ai) which helped me understand what happened with my withholding and how to fix it. What it showed me was that the withholding tables had changed, plus my raise had pushed me into a situation where the standard calculation wasn't working for my specific situation. The tool lets you upload your tax documents and shows you exactly why your refund changed and what to do about it. Seriously saved me from making the same mistake this year!

0 coins

Aliyah Debovski

•8M

Yes, it definitely works with state taxes! That was actually my biggest issue too - my federal withholding was okay but my state withholding was way off. The tool breaks down both federal and state withholding issues. Regarding security, I had the same concern initially. They use bank-level encryption for all document uploads and don't store your actual tax documents after analysis. They explain their security measures pretty clearly on their site, and after researching them, I felt comfortable enough to give it a try. You can also remove any personal identifiers from your documents before uploading if you're extra cautious.

0 coins

Cass Green

•8M

I have to admit I was wrong about taxr.ai. After my skeptical comment earlier, I decided to try it anyway because I was desperate to understand why my refund dropped from $1,400 to just $290 this year despite getting a raise. The tool immediately identified that my employer had actually been underwithholding all year - something about how they calculated my semi-monthly paycheck withholding after my rate increased. It showed me exactly what to put on my W-4 to fix the problem going forward (I needed to add $75 additional withholding per paycheck). Best part was I could see exactly why the numbers changed from last year to this year with a side-by-side comparison. So much better than the generic advice I was getting elsewhere!

0 coins

Finley Garrett

•8M

If you're still confused about your tax situation and want to talk to an actual IRS agent about it (which I highly recommend), try Claimyr (https://claimyr.com). I was in the EXACT same situation - made more money but somehow got a smaller refund - and I spent WEEKS trying to get through to the IRS on my own with no luck. Claimyr got me connected to an IRS agent in about 20 minutes when I had been trying for days on my own. The agent was able to explain exactly what happened with my withholding and confirmed I needed to adjust my W-4. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c The IRS agent actually told me there was an error in how my employer was calculating state withholding that affected a lot of people this year, which explained everything.

0 coins

Finley Garrett

•8M

They don't have a special phone number - they use the same IRS numbers everyone else does. What they do is use an automated system that does the waiting for you. It basically calls repeatedly using their system until it gets through, then it calls your phone and connects you directly to the IRS agent. So you don't have to sit there listening to hold music for hours. The reason it seems impossible to get through is that the IRS phone system has a cap on how many people can be on hold at once. Most people call during peak hours and get rejected. Claimyr's system keeps trying during off-peak times and different queue loads to find an opening in the system. I was super skeptical too, but it actually worked. The IRS agent I spoke with was really helpful and explained exactly why my withholding changed even though I didn't adjust my W-4.

0 coins

Holly Lascelles

•8M

Ok I need to apologize for my skeptical comment about Claimyr. After posting that, I was desperate enough to try anything and decided to give it a shot. I'm actually shocked that it worked. Got connected to an IRS agent in about 35 minutes (which is LIGHT YEARS faster than my previous attempts). The agent explained that there was a withholding table change that affected people in my income bracket, especially those who got raises mid-year like I did. She walked me through exactly how to adjust my W-4 for next year to avoid the same issue. What's crazy is I had been trying to reach someone at the IRS for months about this. Can't believe I wasted so much time when I could have just used this service from the beginning. Definitely worth it if you need actual answers from a real IRS person.

0 coins

Malia Ponder

•8M

Most companies have an employee portal or HR system where you can view your current tax withholding settings. Look for something like "Tax Withholding" or "W-4 Information" in your employee portal. If you can't find it there, you'll need to ask your HR or payroll department for a copy of your current W-4 on file. Some companies also include your withholding status on your paystub, which might say something like "Single-0" or "Married-2" indicating your filing status and allowances. Though with the newer W-4 forms, they've moved away from allowances to more specific withholding calculations.

0 coins