Is it possible to owe money in taxes with 0 exemptions?

[Anonymous]

I was chatting with a friend of a friend who had recently done her taxes. She mentioned being shocked at how much she paid in taxes. She ran her stats by me and her withholdings sounded normal. Then she commented that she was surprised she was getting a refund at all since she is a “high earner”. She made roughly $135k. Maybe I’m jaded but I don’t consider that especially high, at least not for this area. The conversation went on and she mentioned how she claimed 0 exemptions and I thought well if they’re taking the full amount of taxes out wouldn’t you expect a refund of some sort no matter how little? Another person we were having lunch with pretty much said this and she countered by saying, again, that “high earners” have to have an additional amount withheld per month or pay period to ensure that they do not owe. I make a little more than this woman makes and I don’t have to do that but I have children and a mortgage, which she does not so our situations are different and I definitely claim exemptions.

I didn’t want to argue with her so I let her cook but … Is this right? At $135k no exemptions is a tax refund unlikely. No properties or multiple streams of income. This just sounded odd to me and I’m struggling to understand her point. Also the “high earners” bit kept throwing me for a loop.

[Anonymous]

Anonymous wrote:I was chatting with a friend of a friend who had recently done her taxes. She mentioned being shocked at how much she paid in taxes. She ran her stats by me and her withholdings sounded normal. Then she commented that she was surprised she was getting a refund at all since she is a “high earner”. She made roughly $135k. Maybe I’m jaded but I don’t consider that especially high, at least not for this area. The conversation went on and she mentioned how she claimed 0 exemptions and I thought well if they’re taking the full amount of taxes out wouldn’t you expect a refund of some sort no matter how little? Another person we were having lunch with pretty much said this and she countered by saying, again, that “high earners” have to have an additional amount withheld per month or pay period to ensure that they do not owe. I make a little more than this woman makes and I don’t have to do that but I have children and a mortgage, which she does not so our situations are different and I definitely claim exemptions.

I didn’t want to argue with her so I let her cook but … Is this right? At $135k no exemptions is a tax refund unlikely. No properties or multiple streams of income. This just sounded odd to me and I’m struggling to understand her point. Also the “high earners” bit kept throwing me for a loop.

If these people can’t itemize, why would you think they would get a refund?

[Anonymous]

Yes the past administration messed with the tax withholding tables and laws and even with 0 exemptions you can owe money.

My duel income house hold makes $250K and we owed $10K the past 2 years.

[Anonymous]

"Refund" (or lack thereof) is only barely related to what taxes they actually pay.

The key info is what they had withheld. Withholding > final tax bill? You get a refund. Withholding < final tax bill? You owe.

[Anonymous]

We have always owed money because we always earned similar amounts. Sometimes a LOT of money (I think the highest so far was $60k).

[Anonymous]

Kids help a lot on taxes but I think the key is two earners with roughly comparable incomes often owe more.

[Anonymous]

Op here, she is single. No kids. No property. I understand how 0 exemptions and married can lead to owing but not 0 exemptions and single. I’m clearly missing something here.

[Anonymous]

It’s not the salaries that get you, it’s the investment income. Depends on how much you paid in quarterly estimated taxes.

[Anonymous]

Anonymous wrote:"Refund" (or lack thereof) is only barely related to what taxes they actually pay.

The key info is what they had withheld. Withholding > final tax bill? You get a refund. Withholding < final tax bill? You owe.

OP here. I understand this but with 0 exemptions how is her final tax bill higher than her withholding when she is giving max withholding?

[Anonymous]

I dunno. When I was single and making about 135k I am pretty sure I got a small refund (claiming only myself as a deduction, right?). I think in part because I could deduct my high state and local taxes.

The tax code is different now of course.

But if your friend is setting to 0, seems plausible they get a small refund.

[Anonymous]

Ah sorry I misread the scenario. I agree op it’s weird! But maybe plausible to the changes in tax law. Defer to others!

[Anonymous]

Not your friends situation because I'm married but I have mine set for married, no exemptions with $100 extra taken out each check and even then it barely took out 10% of my income. I am a lower earner so I suppose that's why but we will definitely owe because whatever I make gets tacked onto my husband's in the 22% bracket.

[Anonymous]

Anonymous wrote:It’s not the salaries that get you, it’s the investment income. Depends on how much you paid in quarterly estimated taxes.

Ding ding ding icapital gains!

[Anonymous]

In the latest changes to the tax code, if you are a salaried worker with no mortgage and no kids, there’s almost no way you’re going to be able to itemize and will wind up with the standard deduction. So depending on how her withholding was set, yes, she can get a refund.

[Anonymous]

There are so many variables for an individual's tax situation that it is really impossible to say. Perhaps she has non-wage income from dividends or something where there's no withholding. Or she is married to a spouse who's not having as much withheld. Or she has no itemized deductions. The possibilities are endless.