Owing Federal tax each year - am I doing something wrong?

[Anonymous]

I do our taxes myself using Turbo Tax. Dual income family (DH and I make almost the same amount of money, AGI is 340K) - 2 kids, each nearly max out 401K (both put in $21K this year), also each do maximum pre tax health FSA. Each claim 0 for federal taxes and also have an additional $100 withheld each pay period. We have mortgage interest and charitable contributions that put us over the standard deduction threshold. It looks like we will owe $5K in federal taxes this year. Does this sound right? (In the past few years, we’ve owed about $2K) Yet, Somehow, each year we get money back from the state (about $2K). Do I just need to up our additional federal taxes withholding?

[Anonymous]

Almost same exact stats OP and I have no idea how to figure it out. We usually owe around 3k federal but get back a grand or 2 from Virginia. I’ve given up on trying to make withholding exact. So long as our net negative at tax time isn’t more than ~2k we can just make the payment. If we start owing a lot more I may need to figure it out.

[Anonymous]

Meant to add we haven’t done taxes yet this year so now you have me a bit worried!

[Anonymous]

There comes a point where claiming 0 deductions doesn't get you any where close to the right amount of tax withholding.

If you owe $5, that means should should have withheld an additional $416 per month. If you are paid every other week, that's an extra $192 on top of the $100 you are already doing.

Our income has gone past this zone and I have to withhold an even larger amount.

[Anonymous]

As long as you do not pay a penalty, I would not. But if you are concerned, then I withhold more next year. I wouldn’t do that though absent penalty because I keep some cash on hand for this and I don’t believe in interest free loans to the government.

[Anonymous]

As far as I'm concerned, if we aren't getting money back, we've done our taxes correctly.

Anyone getting a refund gave the government an interest free loan, whereas their money could have been invested and earning money for them

[Anonymous]

Have you done the two income calculation page or are you just guessing an extra $100 each.

[Anonymous]

OP, do you have investment income? That's what usually pushes me into having to pay at tax time—investment income that didn't have withholding.

If not, then I think you need to do the hard work of projecting what your joint income will be for the year and making sure that's what's being withheld from your paychecks.

[Anonymous]

Same. What changed in the tax code that we owe more now? Our tax liability has increased for the past three years even though our salaries have stayed about the same.

[Anonymous]

Anonymous wrote:Same. What changed in the tax code that we owe more now? Our tax liability has increased for the past three years even though our salaries have stayed about the same.

If you have money market mutual funds or anything that used to pay less than 1% interest 5 years ago, that stuff is earning 3-4% now.

[Anonymous]

You need to withhold more. I withhold 200/check and I think my husband withholds 300/check and we still owe as well.

[Anonymous]

I withhold extra federal and still often owe (or have a small refund), but always have a much larger state refund.

[Anonymous]

I take the amount I owe, divide it by the remaining payperiods for the year and in crease my withholding to protect against penalty. Interest rates were much higher last year causing most people to owe more.

[Anonymous]

When Trump was in office he changed the withholding so it looked like you “got more in your paycheck” but you end up owing at tax time.

Even if you have 0 exemptions and pay the highest amount allowed you will owe.

[Anonymous]

You have to check the box to show you are married to someone who makes similar salary. One family making $200K is going to have a much smaller percentage of taxes taken out than the same family bringing in $400K. Your HR team has no clue what your spouse is making.