Huge (for us) tax bill. What went wrong?

[Anonymous]

Our calculations are way off too and we’re in the same bracket. We fill out the W4 every year and have still owed over $10k for the past two years. Even better, I just got a bill from the IRS for 2021 for an ADDITIONAL $4,500.

[Anonymous]

Anonymous wrote:Our calculations are way off too and we’re in the same bracket. We fill out the W4 every year and have still owed over $10k for the past two years. Even better, I just got a bill from the IRS for 2021 for an ADDITIONAL $4,500.

What’s happened in the past two years….hmmmmmm

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Are you making that income for the first time? Is it the first time you owe so much in taxes? How come you didn’t realize that your take home per pay period had increased by that much?
25k is an insane amount to owe at that income.

No, same amount last year and we owed $6k. So we adjust up and now here we are with $26k.

No investments minus 401(k).

And you didn't notice that your take home paycheck was substantially higher than last year? The blame is entirely on you.
I would understand if the difference was lower, $2k or $3k. But $25k??? There is no way you missed that on your paycheck.

So my take home wasn’t higher, in fact it was a little lower. My take home is approximately $4800/ pay period. After 401(k)/FSA/ etc my gross income was $170k.

If you didn’t change your income significantly or your tax withholding significantly something is being calculated wrong. How much was withheld from your paycheck compared to last year you can look at this year and last years W2 to compare.

On a per paycheck basis, 4800 net (assuming you are paid 24 times per year?) your gross pay from 190k should be 7916, minus your 401k/fsa you should have around 6850 taxable. So you’re paying about 2850 in other deductions (healthcare, dental, etc…) and taxes. How much federal tax is withheld from that?

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Did you do your own taxes, or did you use an accountant? We make what you make, though our incomes are evenly split. I can’t even imagine a 25k bill.

Part of the problem I bet is that the husband is being withheld at 0 for the first $12k and then 12% for the next $30k when he really should be being withheld at 24%. He probably should just quit if you are paying for childcare.

+1 I bet it’s the marginal rate for DH.

But why would that lead to such a large change from the year before? That’s what I find puzzling about OP’s post.

[Anonymous]

Which tax software are you using to calculate your taxes? Maybe that software is buggy. This makes no sense.
Is your effective tax rate the same as last year?

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Are you making that income for the first time? Is it the first time you owe so much in taxes? How come you didn’t realize that your take home per pay period had increased by that much?
25k is an insane amount to owe at that income.

No, same amount last year and we owed $6k. So we adjust up and now here we are with $26k.

No investments minus 401(k).

And you didn't notice that your take home paycheck was substantially higher than last year? The blame is entirely on you.
I would understand if the difference was lower, $2k or $3k. But $25k??? There is no way you missed that on your paycheck.

So my take home wasn’t higher, in fact it was a little lower. My take home is approximately $4800/ pay period. After 401(k)/FSA/ etc my gross income was $170k.

Assuming your AGI before the standard deduction is 170k and DH is 40k (though likely lower), that puts your AGI at 185k after taking the standard deduction. For married filing jointly, your total tax owed for $185K would be $32070.

There's no way you could owe $25k, as that would mean you only had $7k in taxes withheld during the year.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Did you do your own taxes, or did you use an accountant? We make what you make, though our incomes are evenly split. I can’t even imagine a 25k bill.

Part of the problem I bet is that the husband is being withheld at 0 for the first $12k and then 12% for the next $30k when he really should be being withheld at 24%. He probably should just quit if you are paying for childcare.

+1 I bet it’s the marginal rate for DH.

No, it's obviously not this. Quick math here - DH makes $40K per year. He's having at least $4K withheld as married filing jointly. Depending on the AGI, the most tax that could be owed on his $40K is $12k, leaving an $8K deficit, not $25K.

[Anonymous]

Make sure you are not both claiming dependents

[Anonymous]

Anonymous wrote:Make sure you are not both claiming dependents

OP said they claim zero.

[Anonymous]

You have to use the IRS calculator and recalculate the additional withholding quarterly. Having both earners max the 401k can help with just selecting 0 on the W4 but if you are in the owe $30k range then you need to figure out the calculator.

[Anonymous]

Anonymous wrote:You have to use the IRS calculator and recalculate the additional withholding quarterly. Having both earners max the 401k can help with just selecting 0 on the W4 but if you are in the owe $30k range then you need to figure out the calculator.

If both spouses are salaried, there's absolutely no need to recalculate this on a quarterly basis. This is really basic math.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Are you making that income for the first time? Is it the first time you owe so much in taxes? How come you didn’t realize that your take home per pay period had increased by that much?
25k is an insane amount to owe at that income.

No, same amount last year and we owed $6k. So we adjust up and now here we are with $26k.

No investments minus 401(k).

And you didn't notice that your take home paycheck was substantially higher than last year? The blame is entirely on you.
I would understand if the difference was lower, $2k or $3k. But $25k??? There is no way you missed that on your paycheck.

So my take home wasn’t higher, in fact it was a little lower. My take home is approximately $4800/ pay period. After 401(k)/FSA/ etc my gross income was $170k.

Assuming your AGI before the standard deduction is 170k and DH is 40k (though likely lower), that puts your AGI at 185k after taking the standard deduction. For married filing jointly, your total tax owed for $185K would be $32070.

There's no way you could owe $25k, as that would mean you only had $7k in taxes withheld during the year.

OP’s story makes absolutely no sense. This is a troll post.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Are you making that income for the first time? Is it the first time you owe so much in taxes? How come you didn’t realize that your take home per pay period had increased by that much?
25k is an insane amount to owe at that income.

No, same amount last year and we owed $6k. So we adjust up and now here we are with $26k.

No investments minus 401(k).

And you didn't notice that your take home paycheck was substantially higher than last year? The blame is entirely on you.
I would understand if the difference was lower, $2k or $3k. But $25k??? There is no way you missed that on your paycheck.

So my take home wasn’t higher, in fact it was a little lower. My take home is approximately $4800/ pay period. After 401(k)/FSA/ etc my gross income was $170k.

Assuming your AGI before the standard deduction is 170k and DH is 40k (though likely lower), that puts your AGI at 185k after taking the standard deduction. For married filing jointly, your total tax owed for $185K would be $32070.

There's no way you could owe $25k, as that would mean you only had $7k in taxes withheld during the year.

OP could have significant interest income, which would be taxed at ordinary rates. It's not out of the realm of possibility with interest rates pushing 5%.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Are you making that income for the first time? Is it the first time you owe so much in taxes? How come you didn’t realize that your take home per pay period had increased by that much?
25k is an insane amount to owe at that income.

No, same amount last year and we owed $6k. So we adjust up and now here we are with $26k.

No investments minus 401(k).

And you didn't notice that your take home paycheck was substantially higher than last year? The blame is entirely on you.
I would understand if the difference was lower, $2k or $3k. But $25k??? There is no way you missed that on your paycheck.

So my take home wasn’t higher, in fact it was a little lower. My take home is approximately $4800/ pay period. After 401(k)/FSA/ etc my gross income was $170k.

Assuming your AGI before the standard deduction is 170k and DH is 40k (though likely lower), that puts your AGI at 185k after taking the standard deduction. For married filing jointly, your total tax owed for $185K would be $32070.

There's no way you could owe $25k, as that would mean you only had $7k in taxes withheld during the year.

OP could have significant interest income, which would be taxed at ordinary rates. It's not out of the realm of possibility with interest rates pushing 5%.

That’s a whole lot of interest to be off by $25k. If you earn that much from your investments you should be making quarterly tax payments.

[Anonymous]

Anonymous wrote:It's probably the withholding. A few years ago, they (the IRS, I guess) changed something, and it has been impossible for us to figure out what our withholding should be. You could also pay estimated taxes, which is what our tax guy told us to do.

Thank you for this intel. I've pretty much had my withholding / W-4 on autopilot in a similar job for many years, and I had a big tax liability for 2020. I adjusted my withholding for 2021 and overshot, so then readjusted for 2022 and had a big liability again (about $4-$5K in each case). In prior years my withholding always got me to within $1K of my actual tax bill.