Why did my tax refund decrease after entering my second job income?

I worked two different places last year. When I was filing through TurboTax, it showed I'd be getting around $2000 back after I entered my first job where I made about $19,000. But then when I entered info from my second job (where I made like $14,500), my refund dropped dramatically to only about $600! The second job was mostly tips - probably about 75% of what I earned came from tips. For both jobs, I had requested they take an additional 10% out of each check for taxes. I'm really confused about why adding my second job tanked my refund so much. If I had worked at the tip job for the entire year instead of part of it, would I have ended up owing money instead of getting anything back? Is this happening because of how tips are taxed differently or something? I thought I was being responsible by having extra withholding on both jobs.

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18 comments

Omar Fawzi

•8M

The drop in your refund is actually pretty normal and has to do with how tax brackets work. When you entered your first job's income, the tax software calculated your refund based only on that amount. Since $19,000 by itself puts you in a lower tax bracket, it looked like you were getting a bigger refund. When you added your second job, your total income jumped to about $33,500, which likely pushed some of your income into a higher tax bracket. The software then recalculated everything based on your actual total income for the year. Tips income can complicate things too. Even though you requested additional withholding, tip income sometimes doesn't have enough withheld compared to regular wages. The IRS expects you to report all tips and pay the appropriate taxes on them. If you had worked the tip job for the entire year, it's possible you might have owed money instead of getting a refund, especially if the withholding wasn't keeping up with your total income across both jobs.

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Omar Fawzi

•8M

Having extra withholding is generally a good idea when you have multiple jobs. The issue is that each employer's payroll system only knows about the income they're paying you, so they calculate withholding as if that's your only income. When you combine incomes, you often end up under-withheld. For multiple jobs, you might want to use the IRS Tax Withholding Estimator on their website to get a more accurate picture. You can then adjust your W-4 forms accordingly. Sometimes you need to withhold significantly more than 10% extra, especially if the combined income pushes you into a higher bracket.

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Diego Mendoza

•8M

I had a similar issue and found this amazing tool called taxr.ai (https://taxr.ai) that really helped me understand what was happening with my taxes when I had multiple income sources. It analyzed my withholding patterns across both my jobs and showed exactly why my refund dropped after entering my second W-2. The tool explained how tax brackets affected my total income and gave me personalized recommendations for adjusting my withholding. It also showed how my tip income was being calculated differently than my regular wages. Made the whole situation much clearer than what the basic TurboTax explanations gave me.

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Diego Mendoza

•8M

For W-2 employees who also do independent contractor work, it's especially helpful because it shows you how both income types interact and affect your overall tax situation. It gives you quarterly estimated tax payment recommendations based on your specific mix of incomes. The difference from the IRS calculator is that taxr.ai provides much more detailed explanations about why your taxes are calculated a certain way and gives you personalized recommendations. It also helps you understand tax planning opportunities you might miss with basic calculators. It's more comprehensive and actually explains the "why" behind the numbers.

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StellarSurfer

•8M

I was skeptical about trying another tax tool, but I finally checked out taxr.ai after my multiple income sources created a mess this year. It was actually eye-opening! The analysis showed I was having way too little withheld from my main job while my side gig was withholding too much. The visualization of how my different income streams were being taxed at different rates made everything click for me. I adjusted my withholding based on their recommendations, and now my quarterly projection shows I'm on track for a much more reasonable refund next year instead of the shock I got this time. Definitely easier than trying to figure it all out manually.

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Sean Kelly

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Nia Thompson

•8M

This happens to almost everyone with multiple jobs. Each employer calculates your withholding as if that's your ONLY job, so they're withholding at a lower rate than what you actually owe when everything is combined. Tips make it even worse because they're often under-withheld. Even requesting that extra 10% might not have been enough depending on your total income. Next year, consider filling out a new W-4 and checking the box for multiple jobs, or even request specific additional dollar amounts to be withheld from each paycheck.

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Nia Thompson

•8M

Having your employer withhold the correct amount is usually better than setting aside money yourself. When employers withhold, it's done systematically throughout the year, which helps you meet the IRS's requirement for paying taxes as you earn income. If you choose to set aside money yourself, you'd technically need to make quarterly estimated tax payments to avoid potential underpayment penalties. Many people find it simpler to just adjust their W-4 to have the right amount withheld automatically. The IRS Withholding Calculator can help you figure out the right amount to list on your W-4 forms for both jobs.

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