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

[Anonymous]

I always claimed 0 exemptions and often have to pay more. Depends what investment income is, what deductions we have, etc. We are much higher income though.

$135k does not put you in a high bracket after deductions, and she doesn’t have a marriage penalty. Is she making the full 401k contribution?

[Anonymous]

We always get a refund with around that HHI but three kids and childcare credit.

Last year it was a ton of money. I’m keeping my expectations much lower for this year.

We take the married standard deduction as well.

[Anonymous]

I make $160k and claim zero exemptions AND have $500 extra withheld each month. Before I started doing that I owed so much that I had to pay a fine. So yes, people have extra withheld!

[Anonymous]

The new W-4 forms are so confusing. You no longer choose a number 0, 1, 2 exemptions, you have to do calculations to choose an actual dollar amount. I have NO IDEA if we're going to owe or have a huge tax bill this year - we both started new jobs and we both had to use the new W-4 forms.

[Anonymous]

Anonymous wrote:I always claimed 0 exemptions and often have to pay more. Depends what investment income is, what deductions we have, etc. We are much higher income though.

$135k does not put you in a high bracket after deductions, and she doesn’t have a marriage penalty. Is she making the full 401k contribution?

OP here. I asked her this but she didn’t answer; she digressed to another topic. I suspect she is not.

[Anonymous]

Unfortunately the only way to pay a reasonable 20% or lower on taxes is to get revenue from running a business. We found that pure salary jobs caused us to have extreme crushing taxes of 33%+, however after running businesses and getting income we have a way to deduct and pay a more reasonable 20%. Our hhi is 450k

[Anonymous]

Anonymous wrote:

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!

Out.of.touch

[Anonymous]

Anonymous wrote:

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?

Trump f’d up the withholding table with his new tax law.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

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?

Trump f’d up the withholding table with his new tax law.

This. There's now a calculator on the IRS site you can use to figure out how much additional withholding to request to avoid owing, in $ per paycheck. It's annoying though, you need both paychecks for the data entry.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

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?

Trump f’d up the withholding table with his new tax law.

This. There's now a calculator on the IRS site you can use to figure out how much additional withholding to request to avoid owing, in $ per paycheck. It's annoying though, you need both paychecks for the data entry.

That calculator has existed since the early 2000s.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

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?

Trump f’d up the withholding table with his new tax law.

This. There's now a calculator on the IRS site you can use to figure out how much additional withholding to request to avoid owing, in $ per paycheck. It's annoying though, you need both paychecks for the data entry.

That calculator has existed since the early 2000s.

Right but we didn't need it when we just chose 0 exemptions and never owed.

[Anonymous]

Yes with the new withholding tables. I claimed 1 for ten years and always got a modest return. The year they changed the tables I owed over $2000. So I wouldn’t be surprised if some people claiming 0 might end up owing a small amount. Personally I since claiming 0 I haven’t owed but I don’t make over $100k.

[Anonymous]

Anonymous wrote:

Anonymous wrote:I always claimed 0 exemptions and often have to pay more. Depends what investment income is, what deductions we have, etc. We are much higher income though.

$135k does not put you in a high bracket after deductions, and she doesn’t have a marriage penalty. Is she making the full 401k contribution?

OP here. I asked her this but she didn’t answer; she digressed to another topic. I suspect she is not.

In 2022, the line for ‘Highly Compensated Individuals’ was $135,000 from a benefits testing perspective.

[Anonymous]

We always take zero deductions and some years have owed money.

[Anonymous]

Anonymous wrote:

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?

Because she didn't have enough withheld. Depending on the particulars, one may have to take 0 exemptions, plus an additional amount to be withheld per paycheck. I highly doubt you know all the details of your friend's tax situation. Also, as a pp noted, the tax code was made even worse by the past administration.