Taxes not witholding enough

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I'm having a lot of trouble with my taxes and can't seem to figure out why they never add up.

Last year I had additional withholding of $100 a pay period thinking it would be enough (using the calculator). I just did our taxes and we owe $4500 AGAIN. I just don't understand why. Both of us work (standard W4s), married and own a home (5k in mortgage interest deductions from that). I do not think DH's employer is withholding enough. DH says that he put 0 exemption and married, filing jointly. Why aren't enough taxes being taken out of his income? Using the calculator it shows that he's underpaying by $3500 just for his salary. Also, even though he received a 10k raise in the fall, it shows he made less money in 2013 than 2012. I'm just so frustrated by the taxes!

I would really like to fix this for next year to avoid penalties. What am I doing wrong?

something is not right here. zero exemptions and you still owe - even with mortgage deduction? even with the 10K raise in the Fall, no way you should owe that much.

are you using turbo tax?

This is what I don't understand either- OP seems to be doing things right. Maybe one of the smarties on this thread can explain rather than just exclaiming "gosh no!"

Agreed. If everyone on this thread were correct we would all be screwed. I am an intelligent and savvy 48 year old who has been paying taxes for years! Not one time did it ever occur to me that my employer could be withholding incorrectly. If this were the case then my employer would be hugely penalized as well.
So - assuming that I am married, filing jointly and I fill out my W4 correctly, zero exemptions...taking the mortgage interest deduction and fully funding my 401K then employer should be withholding X...what's the mystery here?

Seriously - Google marriage penalty. Many others on the web can explain it better than me. Basically, the withholding amounts are set upon the old standard of one spouse grossly out earning the other. Like when the wife never worked. If you both work, you often need to have one person withhold at the single rate unless you have some kids.

[Anonymous]

Anonymous wrote:I'm having a lot of trouble with my taxes and can't seem to figure out why they never add up.

Last year I had additional withholding of $100 a pay period thinking it would be enough (using the calculator). I just did our taxes and we owe $4500 AGAIN. I just don't understand why. Both of us work (standard W4s), married and own a home (5k in mortgage interest deductions from that). I do not think DH's employer is withholding enough. DH says that he put 0 exemption and married, filing jointly. Why aren't enough taxes being taken out of his income? Using the calculator it shows that he's underpaying by $3500 just for his salary. Also, even though he received a 10k raise in the fall, it shows he made less money in 2013 than 2012. I'm just so frustrated by the taxes!

I would really like to fix this for next year to avoid penalties. What am I doing wrong?

Breaking close to even with the IRS is work most people do not want to do hence is all the refunds. Here is my method though not perfect either:

When you and your husband complete the W-4 form, you should both check the "married, but withhold at a higher single rate" box. There is no "Married, filing jointly" box so your husband maybe confused. The "Married" box should only be checked if your spouse does not have a job and vise verse.

Next you guys need to decide the number of allowances. If you do not care about the division of withholding and filing jointly, the one who hate filing this form and dealing with HR multiple times should claim 1 allowance (him/herself). The other should complete the worksheet on page 2 of the W-4 form which should help you estimate the number of allowances to claim. Then submit both W-4 forms.

And because this may still not be perfect (e.g. you forgot a deduction when filling the worksheet or have an income aside from your two salaries), Wait until the next pay checks arrives (yours and your husband). Then estimate how much you would pay by the end of the year (for each of you: federal taxes withheld year to date + federal tax withheld per pay period * the remaining periods in the year). Note this amount will be lower than the actual withholding if either of you get a raise or a bonus later in the year. Now compare your estimated withholding with last year taxes (assuming no major income change or life events in 2014). If the amount is close (+/- 1,000), leave it be. If they will be withholding too much increase your allowances and if too little decrease your allowances and file W-4 again. Repeat as needed.

Keep in mind there are many events that will throw this balance once you find it (e.g. buying/selling a property, moving to a different state/county, adding/losing a dependent, divorce, etc ...) so this is not a one time exercise. That is why most people are content with claiming 1 allowance lending their money to the IRS for the year and getting a big refund at the end. Unfortunately the financially better choice (from my point of view) require continuous work and monitoring.

Disclaimer: I am not a professional and I could be wrong on somethings (as I am sure DCUMers will point out) that is just my personal method. Good luck.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I'm having a lot of trouble with my taxes and can't seem to figure out why they never add up.

Last year I had additional withholding of $100 a pay period thinking it would be enough (using the calculator). I just did our taxes and we owe $4500 AGAIN. I just don't understand why. Both of us work (standard W4s), married and own a home (5k in mortgage interest deductions from that). I do not think DH's employer is withholding enough. DH says that he put 0 exemption and married, filing jointly. Why aren't enough taxes being taken out of his income? Using the calculator it shows that he's underpaying by $3500 just for his salary. Also, even though he received a 10k raise in the fall, it shows he made less money in 2013 than 2012. I'm just so frustrated by the taxes!

I would really like to fix this for next year to avoid penalties. What am I doing wrong?

something is not right here. zero exemptions and you still owe - even with mortgage deduction? even with the 10K raise in the Fall, no way you should owe that much.

are you using turbo tax?

This is what I don't understand either- OP seems to be doing things right. Maybe one of the smarties on this thread can explain rather than just exclaiming "gosh no!"

Agreed. If everyone on this thread were correct we would all be screwed. I am an intelligent and savvy 48 year old who has been paying taxes for years! Not one time did it ever occur to me that my employer could be withholding incorrectly. If this were the case then my employer would be hugely penalized as well.
So - assuming that I am married, filing jointly and I fill out my W4 correctly, zero exemptions...taking the mortgage interest deduction and fully funding my 401K then employer should be withholding X...what's the mystery here?

Seriously - Google marriage penalty. Many others on the web can explain it better than me. Basically, the withholding amounts are set upon the old standard of one spouse grossly out earning the other. Like when the wife never worked. If you both work, you often need to have one person withhold at the single rate unless you have some kids.

Even having kids doesn't mean you won't owe money to the government when you do your taxes. If you make too much (and apparently DH and I did in 2012) then the tax credit doesn't apply to you. DH changed jobs that year and didn't check his withholdings until I did our taxes and realized we owed about the same as OP. His withholdings were set at "married, filing jointly" instead of "married, file at a higher single rate". We quickly fixed that!

[Anonymous]

Anonymous wrote:OP here- We're using turbo tax.

I assume that when you have 0 exemptions your employer should withhold the correct amount of tax for your bracket/income? Is this not correct?

Are you sure his exemptions are really 0?

[Anonymous]

Look up the recent thread about dual income households and withholdings. Plenty of people withhold at single rate (this withholds more money), 0 exemptions, PLUS extra $500 (for example) per paycheck. You can enter your and your husband's incomes onto the IRS withholding calculator for a suggested combination.

[Anonymous]

When you select "Married", the calculator assumes you are the only income for two people. There is a worksheet on page 2 of the W-4 on what to do if you are a two-earner family. I am flabbergasted at the number of people who do not understand taxes. You fill out the W-4 with a certain exemption status (Single/Married/etc) and number of exemptions, which tells your employer how much to withhold per pay period. It is your responsibility to make sure enough is withheld. Use your tax liability from the previous tax year, or do a quick tax calculation using the free tools on Turbo Tax, etc. Look at your paystubs. Make sure you're having enough tax withheld. This is YOUR responsibility. WTF.

[Anonymous]

Just go to H and R Block

[Anonymous]

You are probably getting hit by the AMT. Claim single instead if married.

[Anonymous]

There are additional taxes this year for the ACA.

[Anonymous]

If your income and deductions are fairly similar each year, take the $4500 you owe and spread it out (ie an extra $375 a month). Make sure the taxes withheld will be at least as much as you owed last year. Not an expert, this is just what I do every April to make sure we are on the right track.

[Anonymous]

Obamacare increased taxes.

[Anonymous]

I did not read all other responses. Part of the problem could be that after deductions you are taxed less based on the after tax amount. I am barely taxed any because we have all of the deductions on my paycheck. I also make less than DH. But when you add our salaries together we have a combined pretax HHI of around $250,000. So the amount withheld from my paycheck is not enough when you look at our combined household income. Last year I requested an additional $100 to be withheld from each of my paychecks. This was eaiser for me than changing the number of exemptions. I have yet to do our taxes this year but I am pretty sure we are going to owe based on a few factors. Once I find out what we owe I will take that amount, divide it by the number of paychecks we have in a year and request that amount be also withheld.

[Anonymous]

Judging by all the replies, it seems that many of you automatically withhold "0" for federal just to make sure you don't owe...even if you have a mortgage deduction?

....and many of you STILL owe? WTH? or am I reading some of these replies incorrectly?

DH and I usually owe a little to federal, but not a ton. maybe $1800? we do not withhold "0" and our HHI is around $250K, and we have mortgage interest deduction. also max out his 401K. so it surprises me that OP finds herself in her predicament of owing $4500.