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Message
General Income Tax Question
Posted on 9/23/24 at 2:03 pm
Posted on 9/23/24 at 2:03 pm
On our W4 last year, my wife and I claimed "Married and 0" for our deductions. When we filed taxes, we took the standard deduction. and the math showed we still owed $10,000.The accounting service who filed my taxes said we need to change our withholdings to "Single and 0."
Based solely on theory, one would think the government would take out the correct amount of taxes and we wouldn't how anything (or very little). What's the point of making a selection on your W4 form if the right amount of taxes aren't deducted? I understand that when you file at the end of the year some people will eventually itemize deductions to reduce their tax burden. However it seems like if you follow at minimum the recommended standard published by the IRS regarding your withholdings, you should at least be close to the taxes that are due. I just don't get how I was $10,000 in the hole last year.
I tried to call the IRS directly to get and explanation, but since it's not tax season, the wait time was over 1.5 hours and I don't have time to sit on the phone for that long throughout the day.
I think I'm going to be in the same position this year too. Can anyone here provide some insight? Should I go to a financial planner instead of an accounting firm? Any advice will be greatly appreciated.
Based solely on theory, one would think the government would take out the correct amount of taxes and we wouldn't how anything (or very little). What's the point of making a selection on your W4 form if the right amount of taxes aren't deducted? I understand that when you file at the end of the year some people will eventually itemize deductions to reduce their tax burden. However it seems like if you follow at minimum the recommended standard published by the IRS regarding your withholdings, you should at least be close to the taxes that are due. I just don't get how I was $10,000 in the hole last year.
I tried to call the IRS directly to get and explanation, but since it's not tax season, the wait time was over 1.5 hours and I don't have time to sit on the phone for that long throughout the day.
I think I'm going to be in the same position this year too. Can anyone here provide some insight? Should I go to a financial planner instead of an accounting firm? Any advice will be greatly appreciated.
This post was edited on 9/23/24 at 2:04 pm
15
Posted on 9/23/24 at 2:12 pm to Hammond Tiger Fan
LINK
I’m not sure why they withhold lower amounts, but I think you have to be within a certain per cent or you owe a penalty.
I just add extra withholding to mine.
I never get it right although I have been within a few hundred dollars at times.
I’m not sure why they withhold lower amounts, but I think you have to be within a certain per cent or you owe a penalty.
I just add extra withholding to mine.
I never get it right although I have been within a few hundred dollars at times.
Posted on 9/23/24 at 2:16 pm to Hammond Tiger Fan
If you have multiple people earning an income in your household, you will never have the "right" amount withheld from your paychecks by filing them out strictly based on the instructions. The different payroll companies do not share the information, they are looking at your specific W-4 and salary and estimating your taxes. And your wife's company is doing the same.
Here's a simplified example. Assume you and your wife both earn $100k. You both file as married and 0. The quick assumption is that the both of you will owe a little over $12k in federal income taxes for a total of $24k. But when you file your taxes a practical way to look at it is one of you will be taxed at $0 - $100,000, and the other will be taxed at $100,001 to $200,000; and your total tax bill will be around $34k.
By both of you filing as Single and 0, the quick assumption indicates that you each will have about $17k withheld for a total of $34k.
Best to work with your tax guy (actual CPA preferably) and see if they will fill out both of your W-4s, or at least walk you through it
Here's a simplified example. Assume you and your wife both earn $100k. You both file as married and 0. The quick assumption is that the both of you will owe a little over $12k in federal income taxes for a total of $24k. But when you file your taxes a practical way to look at it is one of you will be taxed at $0 - $100,000, and the other will be taxed at $100,001 to $200,000; and your total tax bill will be around $34k.
By both of you filing as Single and 0, the quick assumption indicates that you each will have about $17k withheld for a total of $34k.
Best to work with your tax guy (actual CPA preferably) and see if they will fill out both of your W-4s, or at least walk you through it
Posted on 9/23/24 at 2:17 pm to Hammond Tiger Fan
quote:
What's the point of making a selection on your W4 form if the right amount of taxes aren't deducted?
Because it's a scam to try and get people to underpay throughout the year so they can add penalties.
Posted on 9/23/24 at 2:36 pm to Hammond Tiger Fan
IRS: "You owe us taxes!!"
Citizen: "OK, How much?"
IRS: "We don't know, that's for you to figure out. And you had better be right!"
Citizen: "OK, How much?"
IRS: "We don't know, that's for you to figure out. And you had better be right!"
Posted on 9/23/24 at 2:39 pm to Hammond Tiger Fan
quote:
Based solely on theory, one would think the government would take out the correct amount of taxes and we wouldn't how anything (or very little).
It's not the government doing the withholding, it's the accounting department where you work. The payroll software doesn't know how much money your spouse makes or if you have any other income streams. If you think you aren't withholding enough, go to whoever does your payroll and have them start withholding more.
Posted on 9/23/24 at 2:42 pm to makersmark1
quote:
I’m not sure why they withhold lower amounts, but I think you have to be within a certain per cent or you owe a penalty.
They did slap us with a $500 penalty for not paying the correct amount of taxes during the year.
Posted on 9/23/24 at 2:52 pm to Hammond Tiger Fan
Usually the penalty will be waived if it is the first time it has happened. However if you do it multiple years in a row they will not
Posted on 9/23/24 at 2:53 pm to Hammond Tiger Fan
That's not how the game works anymore. Now - you HAVE TO report all other income (your spouse's income) on your W4 and your spouse must do the same. That is they only way your payroll and your spouse's payroll companies/software can withhold the correct amount.
Posted on 9/23/24 at 2:58 pm to Hammond Tiger Fan
quote:
I tried to call the IRS directly
That's actually bananas.
Posted on 9/23/24 at 4:07 pm to eatpie
quote:
IRS: "You owe us taxes!!"
Citizen: "OK, How much?"
IRS: "We don't know, that's for you to figure out. And you had better be right!"
Isn't it actually worse since the employers report the amounts to the IRS separately?
IRS: "You owe us taxes!!"
Citizen: "OK, How much?"
IRS: "We know how much, but we're not telling you. That's for you to figure out. And you had better be right!"
This post was edited on 9/23/24 at 4:08 pm
Posted on 9/23/24 at 7:47 pm to Hammond Tiger Fan
If your wife didnt work you would be married and zero. Because you both work, you have to account for the second income by increasing deduction or tricking it by withholding single. Otherwise, both your incomes will be withheld assuming a lower tax because you're both assumed to get the full married standard deduction and taxed in lowest brackets first when in reality the second income is stacked on top and taxed in higher brackets and you only get one married standard deduction.
This post was edited on 9/23/24 at 8:02 pm
Posted on 9/24/24 at 6:23 am to Hammond Tiger Fan
We were in the same boat when we filled this year. I added an extra amount to my W4 to be taken out of my check. One of the last pages of the W4 has a sheet to give a estimate of what you should take out.
Like.ithwrs posted. It's due to your pay being in one tax bracket but combined you jump to another.
Like.ithwrs posted. It's due to your pay being in one tax bracket but combined you jump to another.
Posted on 9/24/24 at 6:56 am to Hammond Tiger Fan
Weird. We usually owe each year but have never been assessed a penalty. We usually end up owning 10-15k on the fed each year
Posted on 9/24/24 at 7:07 am to Hammond Tiger Fan
Why not just both withhold $100 each a week
Posted on 9/24/24 at 7:30 am to MSTiger33
I don’t think that’s possible
Posted on 9/24/24 at 7:31 am to Hammond Tiger Fan
quote:
They did slap us with a $500 penalty for not paying the correct amount of taxes during the year.
That's annoying
Posted on 9/24/24 at 8:07 am to Hammond Tiger Fan
You pick married and they withhold as if you make all the income and your wife makes nothing.
Thus you’d be way underpaid.
You said this like 1.5 hours is a long wait time because it’s not tax season. That is the shortest wait time I’ve heard in years.
I’m surprised you even got put on a wait list. When it gets over 4 hours they just answer and say “we’re too busy. Try calling another time” and hang up on you.
Thus you’d be way underpaid.
quote:
I tried to call the IRS directly to get and explanation, but since it's not tax season, the wait time was over 1.5 hours
You said this like 1.5 hours is a long wait time because it’s not tax season. That is the shortest wait time I’ve heard in years.
I’m surprised you even got put on a wait list. When it gets over 4 hours they just answer and say “we’re too busy. Try calling another time” and hang up on you.
This post was edited on 9/24/24 at 8:08 am
Posted on 9/24/24 at 8:09 am to lsu for the win
quote:
Now - you HAVE TO report all other income (your spouse's income) on your W4 and your spouse must do the same.
You don’t HAVE TO do anything on a W-4.
Posted on 9/24/24 at 8:16 am to Hammond Tiger Fan
There is a chart in the instructions of the W4 that has the amount of extra withholding you should have.
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