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Just a quick heads up - even if you don't legally NEED to file, sometimes it's beneficial anyway. Not only to get withholding back like others mentioned, but also because some tax credits are refundable, meaning you could get money even if you don't owe taxes. The Earned Income Credit might apply depending on your situation.
Are there any downsides to filing when you don't have to? Like does it trigger any extra scrutiny or anything?
There are really no downsides to filing when not required. It doesn't trigger extra scrutiny or increase your audit risk. The IRS actually appreciates voluntary compliance. Filing an unnecessary return might be a slight inconvenience, but many tax software options are free for simple returns with low income. Plus, getting in the habit of filing annually helps you understand the process better for when you do have more complex tax situations in the future.
Quick q - I'm in a similar boat but I also had like $200 in crypto gains. Does that change anything about needing to file?
Have you checked your withholding amounts? That's a huge factor that people often enter differently between programs. Make sure both programs have your correct federal withholding amounts from your W2s (Box 2). That alone could explain a huge difference.
OMG you're a genius! I just checked and somehow I had completely missed entering the federal withholding amount in TurboTax. Withholding was there in Taxslayer but not TurboTax. After fixing this, both programs now show almost the same result (within $200 of each other). I can't believe I missed something so obvious but I guess that's why it's good to double-check with multiple programs. Thank you so much!
Happy to help! That's such a common mistake and explains the massive difference you were seeing. The software can only work with what we give it. The $200 remaining difference is probably due to how each program handles certain calculations or rounding. That's normal and nothing to worry about. Either program should be fine for filing now that you've fixed the main issue.
Which version of TurboTax are you using? Their free version often misses deductions that their paid versions catch. I've seen the Deluxe version find thousands in deductions that the free version missed.
This is super important. TurboTax free doesn't support itemized deductions for homeowners properly. If you own a home, you really need at least their Deluxe version.
One thing to consider with the new W-4 is that if you and your spouse both work and make similar incomes, just checking the box in Step 2(c) is usually sufficient. But if there's a big difference in your incomes, you might want to use the online IRS Tax Withholding Estimator or the worksheet that comes with the W-4 for more accurate results. At least that's what worked for us - my spouse makes about twice what I do, and when we just checked the box, we ended up owing quite a bit. Using the more detailed worksheet got us much closer to breaking even.
What if one person gets bonuses that vary year to year? That's what always throws off our withholding calculations.
For variable bonuses, I recommend using the IRS Withholding Estimator tool and updating your W-4 after any significant bonus payment. Most companies withhold bonuses at a flat 22%, which might not be enough depending on your tax bracket. Another approach is to estimate your total bonus amount for the year (maybe based on last year plus a little extra) and add additional withholding in Step 4(c) to cover the difference. Then if you get more than expected, you can submit a new W-4 to adjust. It's a bit of work, but it's better than getting hit with a big tax bill and possibly underpayment penalties.
I worked in payroll for 10 years and the new W-4 confuses EVERYONE. Here's the simplest way to think about it: - Filing status and Steps 1 & 5 are the only REQUIRED parts - If you check the box in Step 2c, it basically tells payroll to withhold at a higher single rate - Step 3 REDUCES your withholding (for dependents) - Step 4a and 4b affect withholding based on other income or deductions - Step 4c is for requesting additional withholding each paycheck If you're married and both work, either check box 2c (simple but sometimes withholds too much) OR use the IRS calculator for a more precise amount to put in 4c. If you just want to be safe and not owe, check the box in 2c and maybe add a small amount in 4c ($20-50 per paycheck) as a buffer.
This is the clearest explanation I've seen! One question - if my spouse doesn't work currently but might start later this year, should I still check that box in Step 2c now? Or wait until they actually get a job?
One important thing to consider: will your daughter have enough earned income to benefit from the non-refundable portion of the credit? Remember, while $1,000 of the $2,500 AOTC is refundable, the other $1,500 is non-refundable, meaning she needs tax liability to use it. If she barely worked during college, this strategy might not maximize the benefit.
That's a really good point I hadn't considered fully. My daughter did have an internship last summer and works part-time during school, probably earning around $14,000 for the year. Would that be enough to utilize most of the credit?
With $14,000 in earnings, your daughter should have enough tax liability to utilize a good portion of the non-refundable part of the AOTC. After the standard deduction (around $13,850 for 2023), she'll have a small taxable income. Even with minimal tax liability, she'll still get the $1,000 refundable portion, plus whatever portion of the $1,500 non-refundable part her tax liability allows. So while she might not get the full $2,500, she'll likely get significantly more than $1,000. Definitely worth calculating both scenarios to see which benefits your family more overall.
Does anyone know if scholarships affect this? My kid gets a partial scholarship that covers about 60% of tuition.
Yes, scholarships definitely impact the AOTC calculation! Tax-free scholarships that are used for qualified education expenses (tuition and required fees) reduce the amount of expenses eligible for the credit. However, if the scholarship is used for room and board (by including it as taxable income), then it doesn't reduce qualified expenses.
Ryder Greene
Just a quick tip - if you filed with TurboTax, H&R Block, TaxAct or any of the major tax software companies in 2020, try logging into your account on their website. Most of them keep your returns on file for at least 3-7 years, and you can just download your old return to find your AGI. Saved me from having to deal with the IRS directly!
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Carmella Fromis
β’Do you know if this works if you used the free version? I always use different free services each year depending on which one will let me file for free, so I'm not sure if they save returns for the free users.
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Ryder Greene
β’Yes, it generally works even with the free versions! I've used the free version of TurboTax for years, and they still save all my returns. The only difference is how long they store them - some free versions might only keep them for 3 years while paid versions might store them for 7+ years. Even if you used different services, it's worth checking all of them. Just make sure you're logging in with the same email you used when you filed in 2020. Sometimes people forget which email they used for tax services.
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Theodore Nelson
Another option - try entering $0 as your AGI if you're filing electronically for the first time or if you didn't file last year. The IRS sometimes accepts this as a workaround for people who can't access their previous returns.
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AaliyahAli
β’This worked for me! My return kept getting rejected and I was panicking. Tried the $0 AGI trick and it went through immediately. Thanks for the tip!
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