Why is my tax refund so much lower when my income doubled from last year?

Wait does that mean it's actually better to make less money sometimes? Seems backwards if making more means you get hit harder with taxes. And what's the deal with withholding - should OP have changed something when his income went up?

Thank you so much for explaining that. I had no idea those credits phased out at higher incomes. So basically the government was giving us extra money last year because we were lower income, and now that we're doing a bit better they're giving us less help? Is there anything I can do for next year to maybe get more back? Should I be adjusting my W-4 or something?

No, it's always better financially to make more money overall, even if tax credits decrease. Your total income minus taxes is still higher than before - you're just seeing less of a refund because you're keeping more throughout the year. As for withholding, yes, anytime you have a significant income change, you should revisit your W-4. The withholding tables are designed to be fairly accurate for stable incomes, but big jumps like yours often need adjustment. I'd recommend using the IRS Withholding Estimator tool to see if you should adjust your withholding for this year. If you want a bigger refund next year (though this means smaller paychecks throughout the year), you can choose to have additional amounts withheld from each paycheck.

How exactly does this work? Do you just upload your tax documents and it explains things? I'm always nervous about sharing my tax info with random websites.

Sounds interesting but does it actually help you fix the problem or just tell you why you're screwed? Like can it help find deductions you missed or is it just explaining why you're getting less back?

It's super straightforward - you upload your current and previous returns, and it compares them side by side to show exactly what changed and why. They use bank-level encryption so it's secure, and they don't store your documents after analysis. It does more than just explain - it identifies potential deductions you might have missed and suggests tax planning strategies for the next year. In my case, it found a home office deduction I qualified for but didn't claim, and showed me how adjusting my W-4 would prevent getting a smaller refund next year. It basically gives you actionable steps instead of just explaining the problem.

How much does this cost? Seems like you'd be paying just to talk to a government agency that should be accessible anyway.

This sounds like total BS to me. No way there's some magical service that gets you through to the IRS when millions of people can't get through. And conveniently they "found" extra money for you? Sounds like a scam.

The cost varies depending on which IRS department you need to reach, but it's reasonable considering how much time you save. And yes, you're right that the IRS should be more accessible, but the reality is they're understaffed and overwhelmed. I was skeptical too at first! But it's not some "magical" service - they use technology to navigate the IRS phone system and secure your place in line without you having to stay on hold. The extra money wasn't "found" by the service - it was the IRS agent who identified an error in how my childcare credits were processed once I actually got to speak with someone. The service just got me through to a real person who could help.

I thought tax brackets might be part of it. So even though I'm in a higher bracket, is it only the amount above the previous bracket that gets taxed at the higher rate? I always get confused about how that works. Also, do you know if there's any way to figure out what the "sweet spot" is where I'm making good money but still getting decent credits/refunds? Feels like I need a spreadsheet to figure all this out.

That's exactly right! Only the money that falls into each bracket gets taxed at that bracket's rate. For example, if the 12% bracket ends at $45,000 and the 22% bracket starts at $45,001, only the $9,000 of your income above $45K gets taxed at 22%. The first $45K is still taxed at the lower rates. There isn't really a "sweet spot" because making more money is always better overall. However, there are certain income thresholds where credits phase out quickly. For a family of four, the EITC phases out rapidly between $45K-$59K depending on filing status. The Child Tax Credit starts phasing out at much higher incomes ($200K for single, $400K for married filing jointly).

You're probably having an AGI mismatch issue. The IRS uses last year's AGI to verify your identity. Make sure you're entering the EXACT number from last year's return, down to the dollar. If you used a different tax software last year, that might be the problem.