Disappearing Tax Software Refund?

by Tax Guy - Burlington Accountant on March 22, 2011 Print This Post Print This Post

If you’re married and started entering your income into tax software such as TurboTax, you might have noticed that your refund starts rather large and then suddenly drops when you enter your spouses’ income into the software.

This is a question I have been receiving regularly from visitors to CTR.

If this happens to you, then you are not alone! And if this happens to you, it’s probably quite normal.

The Software Starts Claiming A Dependent

Tax software is only as good as the information you put into it.

You are entering one spouses’ income at a time. If you start with your income first, your spouse will not have any income in the software.

The tax software then assumes your spouse has no income and claims the spousal tax credit. The spousal credit is worth $1,557 of tax federally plus an additional amount for the provincial credit ($500 to $700 on average).

Spousal Credits Eliminated With Spouses Income

When you begin entering your spouses’ income, the spousal credit is reduced until their income exceeds the threshold ($10,382 federally for 2010).

The result is that you see a larger refund initially that is reduced or is gone when you enter your spouses’ income.

Here is an Example

Jack and Jill live in Ontario and each earns $50,000. Jack enters all of his income into TurboTax and notices he get a refund of $2,262. Once he enters Jill’s information, the refund is gone.

Initially the software gave Jack a credit totalling $2,262 that was eliminated when Jill’s information was entered.

Final Thoughts

It may seem a little odd at first, but it is perfectly normal. There is nothing wrong with your tax software and it’s working just fine!

I hope this helps you prepare your taxes this year.

About The Tax Guy...

Dean Paley CGA CFP is a Burlington accountant and financial planner who services individuals and business owners locally, nationally and internationally. Dean has appeared in the National Post, Toronto Star and Metro News.

To find out more, visit Dean's website Dean Paley CGA CFP or connect via Twitter @DeanPaleyCGACFP.

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Kevin Ross March 22, 2011 at 12:16 pm

Just wondering about the link to Turbo Tax Canada in your article… anrdoezrs.net

It is flagged as a suspect site by WOT…

Just thought I would let you know !


Tax Guy March 22, 2011 at 12:43 pm

It’s an affiliate link. Intuit allows publishers such as myself to refer business to them. If a purchase is made, I receive a commission.

The androzers link is a tracking link that redirects to Turbotax.

The disclosure page (about) on my site does explain that I accept paid advertising.

Kevin Ross March 23, 2011 at 10:11 am

Thanks for your reply.
I just wanted to let you know. WOT is quite a popular add-on for Firefox, so, for those who use it, it will stop them from following the link. Personally, I never click on links that are marked red by WOT… the Web is just too risky these days !


Kevin Ross March 22, 2011 at 12:17 pm

Good article, though… I wondered about this when I got married, then I did a test as Single and Married and saw that, right off the bat, there was a larger Refund for reporting as Married as opposed to Single.


maybelline March 22, 2011 at 10:57 pm

Thanks for the post. I got married last year and did a test run in the tax software and like Kevin above, noticed a difference b/w reporting married vs. single. Thanks for the heads up.

first line mortgages March 23, 2011 at 9:36 am

Thank you for the assurance because I definitely got worried when I put my information in and it just disappeared.

Richard Black April 12, 2012 at 5:58 pm

Wanted to thank you for the great article answered my questions and concerns in a simple way that is understandable.

Tax Guy April 13, 2012 at 10:36 am

Thank you and I’m glad the article is helpful!

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