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[quote=Anonymous][quote=Anonymous]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? [/quote]

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.

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