Adjusting withholding

[nhjacobs]

If my wife and I have owed about $2,500 each year on our taxes for the last two years, can I simply divide this by 26 pay periods, and input $100 on Step 4 on the W-4 form to have this much additional pay with-held so we hopefully don't have to pay anything additional? 

[SwapnaM]

Yes, that's a very common and generally effective strategy to address consistent under-withholding, especially if your income, deductions, and credits remain relatively stable year-to-year.

If you've consistently owed $2,500 for the last two years, it indicates a recurring shortfall in your withholding. By instructing your employer to withhold an additional $100 from each bi-weekly paycheck ($100 x 26 pay periods = $2,600 over the year), you're directly compensating for that historical underpayment.

Update Your W-4 Form:

• On your W-4 form, go to Step 4(c) and enter the additional amount you want withheld per paycheck. In this case, you would enter $100

Use the IRS Tax Withholding Estimator: After you've made the change, still take the time to run the estimator. Input all your current year's estimated income (including expected bonuses) and the fact that you've just added $100 extra withholding. The estimator will then confirm if that $100 is likely sufficient, or if it recommends a slightly different amount for precision.

@nhjacobs Thanks for the question!!

[nhjacobs]

Thanks so much for the response. To follow-up, is there any pro/con of my doing this just on my pay-check as opposed to my wife and I each submitting updated W-4 forms, to withhold $50 from each of our paychecks instead of just $100 from mine? 

[SwapnaM]

From the IRS's perspective, it makes absolutely no difference whether the additional $2,600 over the year comes entirely from your paycheck or is split between you and your wife's paychecks. The IRS only cares about the total amount of federal income tax withheld by December 31st. It often makes sense to put it on the W-4 of the higher earner or the one whose payroll system is easier to adjust. 

If all on one paycheck, you only need to update one W-4 form. This means less administrative work for you and your wife. Only one employer's payroll system needs to be updated and verified.

@nhjacobs Hope this helps!! Thanks again!!