Are you filing your tax return? Did you notice that the tax refund value dropped after adding a W-2 to the report? It is a typical instance with most taxpayers that the refund goes down after adding the W-2 for the second job. If your spouse moves to work and shows taxes withheld on their wages, even then, the tax refund amount decreases. Why exactly do you receive a lower tax refund? Let’s understand it in detail.
Default Withholding Related to One’s Job!
While you add a W-4 to the withholding, it is a usual assumption that you are the only earner having a single job in the family. For informing your employer that you can withhold more, it is vital to add the worksheet of multiple earners that directly refers to your spouse. However, it is possible to spare this situation if your HR head refrains from raising this query, and you can skip the thing.
Is it essential for my employer to know about other earnings?
It is not the employer’s concern to know that by what means and how many ways you make money. Whether your spouse is earning or not should not be their lookout. Even if you are taking up a part-time job for additional wages, it does not bother the employer unless the productivity or work dedication is affected. But it is imperative to know the repercussions of withholding on the tax refunds.
For instance, if you and your spouse earn $30,000 each year, it sums up the income to $60,000, and tax liability then raises to $3,900 on the overall taxable income of $36,000. But if each of you files the W-4 as a single earner, the respective employers can only withhold $600 that could result in the shortfall of $2,700 during tax payment.
But what if both of you have multiple jobs in various hour schedules? Few payroll processors find it trivial to estimate accurate withholding from employees as no one reveals the overall income is getting in their pockets. As a result, you can never get the right W-4s unless there is the right earning amount.
Can online Tax software give a vague figure for tax refunds?
Many people bumped up calculation an accelerated tax refund figure with the help of online tax software! Why is it so? When you enter the W-2 details into the software, it does not count off the additional withholding from a second income source. Hence, you get an overrated refund amount which is not valid. After entering the secondary W-2, there can be the accurate calculation of taxes resulting in which your tax refund might go down.
How Can I Fix This?
Talking from the taxation norms view, it is ideal to ensure that the W-4s are very precise, and for this, you can update it all year. But if you do not wish that the employers capture all these details, you have the leverage to avoid sharing data relating to the extra tax payments. If still, you cannot retrieve the correct withholding, pay the amount you owe them, and inquire about options like installments for the same.
So, if there is additional unrevealed income coming into your family that is not under the W-2 statement, then the tax refund is subject to go down. If both the married couples work separately, it is ideal to file taxes separately for better tax benefits. The overall refunds depend on the amount your employer withheld from the annual income!