How do I make sure my husband and i have our w-4's set up correctly? Last year we got less back than expected for tax return and owed local taxes

[KimberW · Accepted solution]

When there are two full-time incomes, it's common for the combined amount to be in a higher tax bracket than either job is individually. 

Each employer only knows what they pay to you. So, unless you tell them otherwise on your W-4, your employer is going to assume that your income from them is your only income, that you will take the full standard deduction, and that there are no adjustments to income or dependents.

If you have two jobs -- whether you individually or each spouse on a return has a job -- then every employer is going to make the same assumptions. This means that, overall, you will be under-withheld because each employer will reduce your taxable wages by the full standard deduction.

The best way to fill out the current version of the W-4 is to use the TurboTax W-4 Calculator or the IRS Tax Withholding Estimator. Both of these tools will ask you for information from your most recent pay stubs (to get year-to-date information) as well as what you expect to happen with your paychecks for the rest of the year.

You'll enter information for all jobs that you have (or have had) during 2024, the number of dependents that you have, whether you have any other income or deductions, etc. Then the programs will provide you with the information necessary to fill out the W-4s for each job -- or even a PDF version that you can give to your employer.

Make sure to check for the equivalent of a W-4 form for your state or local withholdings as well. Those are often separate forms with their own instructions. For local taxes in particular, there may not be withholding options for you to set. But make sure that your employers know which city/county you LIVE in and which city/county you WORK in. Your residency status can make a difference as to whether you owe county/city/school taxes.

[Hmurphy19]

Thank you I'll check those links out! 

[Hmurphy19]

Also would it make a difference if my husband has some very large paychecks with overtime and some normal? How would I account for that difference? Sometimes he makes easily 1200-1500 extra with overtime in one paycheck when his normal take home pay is similar to mine though. 

[KimberW · Accepted solution]

When using those calculators, see if you can figure out a "normalized" number for his checks. He may not earn the same on every paycheck, but does he usually have a heavy overtime check once a month? Once a quarter?

If you can come up with what an "average" paycheck looks like for him, then you can use that information in these calculators.

For now, aim to have a higher refund than you may like at the end of the year. And then re-run these calculators every couple of months -- narrowing it closer and closer to what you want to end up with as the year goes on and you have more "actual" data behind you.

Also -- with this level of planning, you can bring your expected refund down to $0 -- which means that YOU get to keep more of your money from each paycheck instead of loaning it to the IRS until they pay your refund.

[Hmurphy19]

Ok thank you! Will do, his overtime is definitely very random, some months there is a ton and others none at all, so averaging it out should help a lot, I think our mistake was not accounting for the overtime difference at all before. I appreciate the tips!