If you file a joint tax return, then both spouses must report all of their income, no matter how small the individual pieces are. The reason your tax refund goes down when you report this extra income is that there was not enough tax withheld from that income relative to the total amount of tax you owe. If you had more tax withheld at the time, you would get a larger refund now, but you would’ve had less money to spend each week.
