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April 2, 2022
Question

tax increase more than income

  • April 2, 2022
  • 1 reply
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My family's income increased by $260 comparing 2021 with 2020, but tax owed increased by $2,106. What could be the reason for this out of proportion increase in income tax?

    1 reply

    Employee
    April 2, 2022

    No one in this user forum can see your tax return or your screen.  There were major tax law changes that began with the 2018 tax year that seem to continue to surprise some people.  Personal exemptions of over $4000 per person were removed beginning with 2018 returns.

     

     Was something different for 2021?  Did you have less income due to the pandemic?  Did you receive unemployment compensation?  If so, did you have tax withheld from it?

     

    There are a lot of variables that affect your refund or tax due including how much you earned, how much tax you had withheld, your filing status, the number of dependents you claim, your deductions and credits, etc.  You may have lost Earned Income Credit or the Child Tax Credit— did a child turn 18?  If you received the EIC last year, remember that changes in the amount you earn have a big effect on the amount of EIC you can get. (Sometimes earning more money means less EIC)  Are you 65 or older ?  If so, your standard deduction is higher. Everyone has a higher standard deduction now so it is harder to use itemized deductions.

     

    If you received advance child tax credit payments between July and December—-remember that you received part of your refund in advance—-so the refund on your tax return can be less than you assumed it would be.

     

     

    And of course, always check your own data entries, looking for errors such as misplaced decimals or extra zeros.

     

    https://ttlc.intuit.com/questions/1901008-why-did-my-refund-go-down-compared-to-last-year-s

     

    Print out 2020  and 2021 and compare them side by side to see what is different. 

     

    https://www.postbulletin.com/news/business/tax-preparers-warn-your-refund-may-be-smaller-than-usual/article_2019b754-4d83-503e-ac96-17e0ffcde602.html

     

    https://turbotax.intuit.com/tax-tips/tax-payments/video-why-would-i-owe-federal-taxes/L3VXudPiN

    **Disclaimer: Every effort has been made to offer the most correct information possible. The poster disclaims any legal responsibility for the accuracy of the information that is contained in this post.**
    April 2, 2022

    Thank you for your help. My financial situation did not change from 2020 to 2021, just two W-2 incomes with $260 increase in taxable gross income, but $2,106 increase in tax, which does not make sense to me.

    Employee
    April 2, 2022

    Start by checking your data entry carefully, especially misplaced decimals and commas.