Friend took early 401K w/drawal of $10,000 in 9/16. She makes $24,000 before that w/draw. Turbo decreased her fed + state return by $5800. Is that a correct calculation?

[heidiup1]

Friend has 2 kids. We deleted & added the $10,000 from 1099 several times with same result ($5800 difference). Tax + penalty seems too high--is this our problem or a Turbo problem? Thanks.

[fanfare]

Getting a refund still? total refund seems too high.
I don't see how you can pay the tax and penalty on $10,000 , with that income,
and still have a refund.
Also, $5,800 difference is way too high.
Somethings are not right,
How much did you put for her federal withholding W-2 Box 2 ?

[fanfare]

Lets just talk about Federal 1040 alone please, not fed + state. One at a time.

[heidiup1]

SweetieJean's answer was the issue. EIC changed dramatically with $10,000 (of previously untaxed) income. Because of her kids, she gets some assistance via EIC. It's not a Turbo problem

[fanfare]

Not according to my test tax return with your numbers. But if you're happy, I'm happy.

[fanfare]

never mind. I DID make a mistake on my own test return.

[heidiup1]

Fanfare, well my original question was confusing. If I stick to the Fed numbers as you asked, the change in Fed return (on the counter) was -$4400 after we added the (previously untaxed) $10,000 early 401K withdrawal to the form.
Child tax credit went from ~$2000 to ~$700
EIC went from ~$4300 to ~$2200
If tax penalty for $10,000 is ~$1000, then all seems good/reasonable to me.
She still gets some $ back due to the EIC + child credit (she claims "single"/no withholding on W4).
Thanks for talking this through.

[SweetieJean · Accepted solution]

Her credits (such as EIC) may have changed due to the increased income.

[heidiup1]

Thank you--that's it!