Another correction must be dome if you do NOT claim children as dependents - and ONLY use them for HOH filing status and EIC.
That is for federal income
Assuming you are Head of Household with two children for whom you do not claim dependency exemption
- standard deduction - with taxable income from wages $11,000 - your estimated tax refund would be ~$3300 - that would be mainly based on earned income credit.
With additional income from retirement plan distribution $17,000 - your total income tax liability is estimated as $1600 regular tax MINUS earned income credit $1700 (it will be reduced because the distribution is NOT classified as earned income) plus additional early distribution tax 10% - $1700 - total $1600
MINUS 20% withholding $3400 - and you still may expect a refund of $1800 plus any federal income tax withheld from your wages.
Possible reasons for the difference
- your additional unearned income will reduce your earned income credit
- previously you did not have income tax liability - but because additional income - there is $1600 income tax liability.
- I do not see how it was possible to receive $7000 refund - that might be additional state refund - but not federal.
If needed - I will verify your tax return - to clarify.
So far - based on these assumptions - you still may expect a refund - but it would be much less that you anticipate.