W-4 withholding

[karlarasmussen]

We were penalized on our tax return this year for owing more than $1,000 so we had a late penalty of $78. I am trying to update my W-4 to ensure this does not happen again this year. I used the IRS calculator to attempt to correctly fill it out but it makes no sense to me the way they filled it in. I am married filing jointly with two dependents. Step 3 states to multiply qualifying children under age 17 by $2,000 which should should give me $4,000 for line 3 but they filled in $1,489. Is this due to them wanting to withhold more from my checks so taking some away from my dependent credits to accommodate this? Step 4 I have $7,989 due to a 1099 job outside of our regular W-2 jobs. HELP! and THANK YOU!

[SusanC6]

If both you and your husband have W-2 jobs, then you both should update your W-4s, following the instructions.

The $7,989 from the Form 1099 needs to be reported as Self Employment income, in Step 2a, not Step 4a.

For 2024, the Child Tax Credit is nonrefundable.  If your credit exceeds your tax liability, your tax bill is reduced to zero, and any remaining unused credit is lost.  However, you may be able to claim a refundable Additional Child Tax Credit for the unused balance.  Up to $1600 per qualifying child in 2024 is refundable and is calculated at 15% of your earned income (wages and self employment) that exceeds $2500.

You child tax credit may only be reflecting as $1,489 due to a low tax liability and earned income.  Reporting the 1099 income properly in Section 2a will increase the earnings that can be used to calculate the refundable Additional Child Tax Credit