Under withholding- anyone else have this problem?

[Anonymous]

Anonymous wrote:

Anonymous wrote:You're going to have to pay and underpayment penalty.

Do the estimate on the IRS website.

The penalty is tiny though. We used to owe huge amounts 20-50k and the penalty was a joke. Now our employer lets us pick how much extra to withhold over the supplemental rate so we do that.

You should either elect for extra withholding, remove and exemptions, or worst case you could do estimated taxes to avoid the small penalty.

The supplemental rate jumps up to 37% once you make more than 1M for the year too, which limits the amount of error for W2 employees making variable income and large bonuses.

What's your income?

[Anonymous]

Anonymous wrote:

Anonymous wrote:You're going to have to pay and underpayment penalty.

Do the estimate on the IRS website.

The penalty is tiny though. We used to owe huge amounts 20-50k and the penalty was a joke. Now our employer lets us pick how much extra to withhold over the supplemental rate so we do that.

You should either elect for extra withholding, remove and exemptions, or worst case you could do estimated taxes to avoid the small penalty.

The supplemental rate jumps up to 37% once you make more than 1M for the year too, which limits the amount of error for W2 employees making variable income and large bonuses.

The joke is on you - this is hardly “tiny”:

The IRS imposes an underpayment penalty if you do not pay enough tax through withholding or estimated payments, usually totaling less than 90% of the current year's liability or 100% of the prior year's tax. The penalty is calculated based on the amount of underpayment, the period of underpayment, and the quarterly interest rate (7% for 2025).

Key Penalties and Rates

Underpayment Penalty: Calculated using interest on the underpaid amount, typically 0.5% of the unpaid taxes per month, up to a maximum of 25%.
Failure to Pay Penalty: If you fail to pay the tax shown on your return by the deadline, a 0.5% penalty applies per month, or 0.25% if an installment agreement is in place.
Interest: Interest accrues on unpaid tax from the due date until paid in full (federal short-term rate + 3%).
Accuracy-Related Penalty: A 20% penalty may apply to the portion of the underpayment due to negligence or disregard of rules.

[Anonymous]

Yes. Pay estimated taxes quarterly

[Anonymous]

Anonymous wrote:You're going to have to pay and underpayment penalty.

Do the estimate on the IRS website.

No we don’t owe any penalty

[Anonymous]

Anonymous wrote:I have this problem due to a lot of RSU compensation and vesting. I have just learned to set aside the extra cash.

RSUs get us too. We do quarterly payments to account for it.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:You're going to have to pay and underpayment penalty.

Do the estimate on the IRS website.

The penalty is tiny though. We used to owe huge amounts 20-50k and the penalty was a joke. Now our employer lets us pick how much extra to withhold over the supplemental rate so we do that.

You should either elect for extra withholding, remove and exemptions, or worst case you could do estimated taxes to avoid the small penalty.

The supplemental rate jumps up to 37% once you make more than 1M for the year too, which limits the amount of error for W2 employees making variable income and large bonuses.

The joke is on you - this is hardly “tiny”:

The IRS imposes an underpayment penalty if you do not pay enough tax through withholding or estimated payments, usually totaling less than 90% of the current year's liability or 100% of the prior year's tax. The penalty is calculated based on the amount of underpayment, the period of underpayment, and the quarterly interest rate (7% for 2025).

Key Penalties and Rates

Underpayment Penalty: Calculated using interest on the underpaid amount, typically 0.5% of the unpaid taxes per month, up to a maximum of 25%.
Failure to Pay Penalty: If you fail to pay the tax shown on your return by the deadline, a 0.5% penalty applies per month, or 0.25% if an installment agreement is in place.
Interest: Interest accrues on unpaid tax from the due date until paid in full (federal short-term rate + 3%).
Accuracy-Related Penalty: A 20% penalty may apply to the portion of the underpayment due to negligence or disregard of rules.

FYI, above a certain income threshold which I imagine most of DCUM meets, it's 110%.

I calculate 110% of last year's tax and check my paystub to make sure my withholding hits 25% of that each quarter. If I'm under, I make an estimated payment to the IRS and my state.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:You're going to have to pay and underpayment penalty.

Do the estimate on the IRS website.

The penalty is tiny though. We used to owe huge amounts 20-50k and the penalty was a joke. Now our employer lets us pick how much extra to withhold over the supplemental rate so we do that.

You should either elect for extra withholding, remove and exemptions, or worst case you could do estimated taxes to avoid the small penalty.

The supplemental rate jumps up to 37% once you make more than 1M for the year too, which limits the amount of error for W2 employees making variable income and large bonuses.

The joke is on you - this is hardly “tiny”:

The IRS imposes an underpayment penalty if you do not pay enough tax through withholding or estimated payments, usually totaling less than 90% of the current year's liability or 100% of the prior year's tax. The penalty is calculated based on the amount of underpayment, the period of underpayment, and the quarterly interest rate (7% for 2025).

Key Penalties and Rates

Underpayment Penalty: Calculated using interest on the underpaid amount, typically 0.5% of the unpaid taxes per month, up to a maximum of 25%.
Failure to Pay Penalty: If you fail to pay the tax shown on your return by the deadline, a 0.5% penalty applies per month, or 0.25% if an installment agreement is in place.
Interest: Interest accrues on unpaid tax from the due date until paid in full (federal short-term rate + 3%).
Accuracy-Related Penalty: A 20% penalty may apply to the portion of the underpayment due to negligence or disregard of rules.

FYI, above a certain income threshold which I imagine most of DCUM meets, it's 110%.

I calculate 110% of last year's tax and check my paystub to make sure my withholding hits 25% of that each quarter. If I'm under, I make an estimated payment to the IRS and my state.

I came here to post this. This poster has it exactly right. Tax estimates are so complicated I just go with 110% of last year’s tax and call it a day. You do have to keep up quarterly though unless you want extra paperwork in your next year’s taxes.

[Anonymous]

You can make estimated payments quarterly, but for $8k the penalties will not be very big so as long as you’re aware of it and have the cash, no biggie.

[Anonymous]

My business exploded last year and we owe multiple hundreds of thousands more than we paid in estimated taxes during 2025. You already know this is an issue for you so (1) pay 110% estimated taxes based on any income beyond standard W2 wages and (2) segregate out 35% of your bonus/investment income into a separate account.

The safe harbor protects you from penalties and the separate account protects you from the mental heartache of extra taxes come April.

[Anonymous]

Anonymous wrote:Doing the taxes this weekend and it's looking like we're going to owe an additional $8k. We've been having this problem each year and it keeps getting worse. I already have an extra $1500 per paycheck withheld, but it's still not enough. I think it's because an increasing amount of our income is coming from bonuses that are withheld at 22% and investment income that doesn't have any withholding, while our marginal rate is 35%. Is there a way to get your employer to withhold bonuses at a higher rate? Or is the only thing to do to increase our regular withholding even more?

Yes, this was a feature of the 2017 Trump tax law.

[Anonymous]

Start making quarterly payments to cover the delta from the bonus.

[Anonymous]

Why would you make quarterly payments when you can just withhold more by updating employer W4?

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:You're going to have to pay and underpayment penalty.

Do the estimate on the IRS website.

The penalty is tiny though. We used to owe huge amounts 20-50k and the penalty was a joke. Now our employer lets us pick how much extra to withhold over the supplemental rate so we do that.

You should either elect for extra withholding, remove and exemptions, or worst case you could do estimated taxes to avoid the small penalty.

The supplemental rate jumps up to 37% once you make more than 1M for the year too, which limits the amount of error for W2 employees making variable income and large bonuses.

The joke is on you - this is hardly “tiny”:

The IRS imposes an underpayment penalty if you do not pay enough tax through withholding or estimated payments, usually totaling less than 90% of the current year's liability or 100% of the prior year's tax. The penalty is calculated based on the amount of underpayment, the period of underpayment, and the quarterly interest rate (7% for 2025).

Key Penalties and Rates

Underpayment Penalty: Calculated using interest on the underpaid amount, typically 0.5% of the unpaid taxes per month, up to a maximum of 25%.
Failure to Pay Penalty: If you fail to pay the tax shown on your return by the deadline, a 0.5% penalty applies per month, or 0.25% if an installment agreement is in place.
Interest: Interest accrues on unpaid tax from the due date until paid in full (federal short-term rate + 3%).
Accuracy-Related Penalty: A 20% penalty may apply to the portion of the underpayment due to negligence or disregard of rules.

I went back and looked at our taxes for the past 10 years. The penalty hasn't ever been more than 1K and we've owed anything from 25k to over 100K because of RSUs. A $1K fine on an income of 600-900k is indeed not that much (0.3%). If you're filing with TurboTax you're already saving 1K compared to an accountant.

Failure to pay is something else entirely. Just like failure to file, the IRS will screw you.

OP shouldn't look at a bunch of AI generated answers on this forum. They should use a calculator and decide what's right for their situation.

[Anonymous]

Anonymous wrote:Why would you make quarterly payments when you can just withhold more by updating employer W4?

The W4 is for regular pay, it won't help you for large supplementals like quarterly stock vests.

[Anonymous]

Ask your employer to withhold at the highest bracket for bonuses. That's what mine does.