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

[Anonymous]

This was us. We had to have extra money withheld each paycheck.

[Anonymous]

It's hard to get it to exactly 0. $2k would be close enough for me. At your HHI it should not be a problem paying it. So I would things alone.

[Anonymous]

I have to keep a spreadsheet and check quarterly. Usually around August we re-group and sometimes have additional funds taken out through the end of the year to avoid owing.

With brokerage, stock RSUs, sales, two people working full time, we have to check in and adjust as needed.

[Anonymous]

I have had funds withheld after we got hit by the tax cuts in 2017/2018--we owed 8k. I make twice as much as I did then, and I withhold an additional 400 (bi-weekly), once I hit 4000k or so in withholdings, I drop ot to 100 as a cushion. Since then I have gotten a bit back each year. I am working to zero it out so I am paying exactly what I owe. I never want to get hit with a tax bill that large again.

[Anonymous]

You can pay the safe harbor amount and then pay the remainder by April 15th. It's 110% of the taxes you paid last year. I am guessing you are off by a few thousand so is fine to pay all of it between Jan 15-Apr 15. If its not single thousands but rather 10K+, I would prepay evenly throughout the year.

[Anonymous]

Anonymous wrote: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?

When was the last time you filled out a W-4? There is no more claiming 0, 1, etc., you have to give them a dollar amount. Try filling out your W-4 every year, OP.

[Anonymous]

Owing money to Uncle Sam come tax time is a good thing. Who wants to give the govt an interest free loan just so they can go waste it. Just make sure you follow the Safe Harbor Rules so you don't pay any under withholding penalties. The easiest Safe Harbor rule to estimate is to pay at least 100% of your prior year tax liability in withholding and estimated taxes (if your previous year AGI was $150K+ then the formula is 110%).

By the way, if you owe $5K in taxes, don't pay early. Wait until April 15th and continue to collect interest unless you like giving the govt free money.

[Anonymous]

Anonymous wrote:Owing money to Uncle Sam come tax time is a good thing. Who wants to give the govt an interest free loan just so they can go waste it. Just make sure you follow the Safe Harbor Rules so you don't pay any under withholding penalties. The easiest Safe Harbor rule to estimate is to pay at least 100% of your prior year tax liability in withholding and estimated taxes (if your previous year AGI was $150K+ then the formula is 110%).

By the way, if you owe $5K in taxes, don't pay early. Wait until April 15th and continue to collect interest unless you like giving the govt free money.

I had an incredible year in the stock market in 2023. My federal tax bill was over $600K and my Virginia state tax bill was over $125K. However, my 2022 tax liability was only about $100K so I made sure I met the Safe Harbor Rule for 2023 (paying about $110K in fed withholding and estimated taxes and about $30K in state withholding) knowing I would owe a lot of tax on 4/15/2023. Much prefer to keep that additional $585K working for me until the last minute then give it to the govt early. Just have to make sure you'll have that money available when the tax is due on April 15th.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Owing money to Uncle Sam come tax time is a good thing. Who wants to give the govt an interest free loan just so they can go waste it. Just make sure you follow the Safe Harbor Rules so you don't pay any under withholding penalties. The easiest Safe Harbor rule to estimate is to pay at least 100% of your prior year tax liability in withholding and estimated taxes (if your previous year AGI was $150K+ then the formula is 110%).

By the way, if you owe $5K in taxes, don't pay early. Wait until April 15th and continue to collect interest unless you like giving the govt free money.

I had an incredible year in the stock market in 2023. My federal tax bill was over $600K and my Virginia state tax bill was over $125K. However, my 2022 tax liability was only about $100K so I made sure I met the Safe Harbor Rule for 2023 (paying about $110K in fed withholding and estimated taxes and about $30K in state withholding) knowing I would owe a lot of tax on 4/15/2023. Much prefer to keep that additional $585K working for me until the last minute then give it to the govt early. Just have to make sure you'll have that money available when the tax is due on April 15th.

Correction: .....knowing I would owe a lot of tax on 4/15/2024.

[Anonymous]

we always owe. sure i’d like to be at $0, but Im glad we don’t get a refund! I’m assuming not all of your income comes from w2 income or lease it would be quite easy to $0 out. Hard to predict what rental income and dividends will look like,

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Owing money to Uncle Sam come tax time is a good thing. Who wants to give the govt an interest free loan just so they can go waste it. Just make sure you follow the Safe Harbor Rules so you don't pay any under withholding penalties. The easiest Safe Harbor rule to estimate is to pay at least 100% of your prior year tax liability in withholding and estimated taxes (if your previous year AGI was $150K+ then the formula is 110%).

By the way, if you owe $5K in taxes, don't pay early. Wait until April 15th and continue to collect interest unless you like giving the govt free money.

I had an incredible year in the stock market in 2023. My federal tax bill was over $600K and my Virginia state tax bill was over $125K. However, my 2022 tax liability was only about $100K so I made sure I met the Safe Harbor Rule for 2023 (paying about $110K in fed withholding and estimated taxes and about $30K in state withholding) knowing I would owe a lot of tax on 4/15/2023. Much prefer to keep that additional $585K working for me until the last minute then give it to the govt early. Just have to make sure you'll have that money available when the tax is due on April 15th.

Correction: .....knowing I would owe a lot of tax on 4/15/2024.

Wow. Why did you take so much capital gain in 2023?

[Anonymous]

Anonymous wrote:Owing money to Uncle Sam come tax time is a good thing. Who wants to give the govt an interest free loan just so they can go waste it. Just make sure you follow the Safe Harbor Rules so you don't pay any under withholding penalties. The easiest Safe Harbor rule to estimate is to pay at least 100% of your prior year tax liability in withholding and estimated taxes (if your previous year AGI was $150K+ then the formula is 110%).

By the way, if you owe $5K in taxes, don't pay early. Wait until April 15th and continue to collect interest unless you like giving the govt free money.

But then she has to pay tax on that interest next year so is the delay actually beneficial?

[Anonymous]

Two main possibilities:
- investment income. There's no withholding on that generally, so you need to either have more withheld from your paycheck or pay estimated taxes.
- bonuses. These are usually withheld at 22%, so if your marginal rate is higher than that, it will result in under withholding and it can be a lot if bonuses are a large part of your income. This was one of the dumber provisions in the Trump tax law.

[Anonymous]

If file as 0, make sure you both file as 0 but withhold at higher single rate.

It could also be due to one or both of your employers not holding out enough tax because they don't know how much your joint incomes are. You are moved into a different bracket wktj joint HHI of $340k.

You could also do nothing and just save money on the side in a HYSA or something and pay the govt the expected shortfall every year.

[Anonymous]

Our new taxes proposed by King Con
Anyone making over $370,000 5%

Under $370,000 get ready for over 30%

Yep MAGA cult of dummies.