Reducing Tax hit

Forum|Forum|26 days ago
May 13, 2026
1 reply
15 views

Hi,

Hoping you can help me think through my W-4 situation for 2026.

Quick context: I'm a W-2 employee at Amazon in Washington state, single filer, with roughly $223,608 in eligible comp ($145,200 base + $78,408 variable paid quarterly). I ended up owing $14,000 on my 2025 return due to under-withholding, and I have a few additional tax events hitting in 2026 — RSU vests, a Roth IRA conversion, and a planned AMZN share sale — totaling roughly $16,000 in projected additional liability. I've already updated my RSU withholding to 35%.

My main question: given the 2025 underpayment, what should I add to Line 4(c) of my W-4 to avoid a penalty in 2026? And does my quarterly variable comp timing affect when I should submit the updated form?

Happy to provide any additional detail. Thanks in advance.

Ask the Experts - W4 - May 2026

mbpeddie

Employee Tax Expert

Regarding converting from a traditional IRA or a 401K into a ROTH , here is some information on this:https://ttlc.intuit.com/turbotax-support/en-us/help-article/retirement-benefits/difference-conversion-recharacterization/L9jeWhmJx_US_en_US

The big increase will likely come from the sale of Amazon shares and depending on how long you held the shares, they would be taxed at either your ordinary income tax rate( short term) or the capital gains rate ( long term ) Here is a resource for you:https://turbotax.intuit.com/tax-tips/investments-and-taxes/capital-gains-and-losses/L7GF1ouP8

When considering how much tax to be withheld, you are required to pay 90% of your current year tax liability, or 100% of your previous years liability, 110% if you income exceeds 150 K . Here is a resource explaining that:

https://turbotax.intuit.com/tax-tips/investments-and-taxes/capital-gains-and-losses/L7GF1ouP8

We cannot do the actual calculation for you to enter on line 4( c) of the W4 but you can use the TurboTax W4 calculator to enter your income and estimate your tax liability to add an additional amount of withholding .

https://turbotax.intuit.com/tax-tools/calculators/w4/

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