Why did my refund drop when I entered a second W-2?
Most people see their refund go down, sometimes by a lot, after entering a second W-2. Here are a few reasons why that happens:
Your total income increased. Your refund meter changes as your numbers change. When you enter a second W-2, you add more income. Generally, more income means more taxes.
Your new total income might be in a higher tax bracket. Your second W-2 could have pushed your total income into a higher tax bracket, making it taxed at a higher marginal rate.
Your withholding credits may not have increased enough to cover your taxes from the second job. If you have two employers, you probably filed a Form W-4 with each to withhold income tax from your wages. Review your W-4s. If you didn’t already, fill out Steps 3–4 (b) on Form W-4 for only the highest-paying job. Leave those steps blank for the other job. This will increase your chances of having enough taxes withheld from your pay to cover your tax liability.
Your new total income may have reduced or eliminated some tax credits. The amount you receive for some credits may drop or you may no longer qualify. These may include:
American Opportunity Tax Credit: eliminated if MAGI exceeds $90,000
Lifetime Learning Credit: eliminated if MAGI exceeds $90,000
Child Tax Credit: decreases with AGI over $200,000
Saver’s tax credit: eliminated if AGI exceeds $39,500
Your new total income may affect your ability to claim certain deductions. Deductions for IRA contributions, medical expenses, and charitable contributions may all decrease when your income increases.
