What changes to make on W4?

[AP916]

We file married jointly and husband has higher income between the two. This year we owed on fed taxes (first time I can remember), but made no changes to W4 since starting our relative jobs. There was a slight increase in income for both of us, but not excessively so. All other factors carried over from prior year. 

Husband W4 is Married with no additional amount withheld, and no provisions for dependents (even though we claim 3 on tax return). Wife's W4 is carried from "old" method; it is Single, 1 exemption. I'm wondering if she should change to "Married, 0". 

I ran through the calculator on the IRS site, and TurboTax site. Curiously, both results were different but with the same numbers. Also not sure if the entered data is completely accurate because it asks about a bonus which we get, but technically the bonus for 2023 was PAID in 2024 with the requisite taxes taken out. That amount can vary year over year so it's not an accurate figure to add. 

I'm trying to figure out what to do to 1) not owe or, 2) at least break even with zero to little return. 

Thank you. 

[SusanR2]

Hello!  You indicated there was a slight increase in pay - you never know that could have pushed you into the next tax bracket.    In any event, here's what I would do:  Have the Wife submit a current W-4 form indicating Married Filing Joint and claiming no dependents.  Complete Step 2 carefully.  Have Husband update his W-4 to ensure Step 2 is completed properly as well.  He can also not claim any dependents in Step 3.  Once the changes are processed, take a look at your paystubs and add up the amount withheld for Federal tax and see if you are on par with last  year.  If not and it is still too low, one of you update the W-4 again and add in an additional amount to be withheld from each check in Step 4, line (c) (keep all other parts of the form the same).  Take the amount you see will be short for this year and divide it by the number of pay periods left.  The answer is the additional amount to be withheld.  You can then update the W-4 again at the start of 2025 since it will be the beginning of the year (as opposed to now when there are only half the pay periods left) and correct the additional amount.    With all of that you should end up good to go!  (You mentioned you've already used our W-4 calculator and the IRS site too, so I am not going to give you links to those pages.)  Hope this helps!

[AP916]

This makes sense and worth a try to at least get a reference point mid year. In terms of Step 2 on the W4, is option (c) worth it if the difference in income between the two is roughly 40% (and the lower paying job is more than half the pay of the higher paying job)? Both husband and wife only have 1 job each. Or, is it better to go with option (a) and use the calculator for the most accurate estimate? 

[SusanR2]

Hi there!  To answer your question, Step 2 line  (a) yields the most accurate result, per the IRS - as stated on page 2 of the form instructions (see below):

"Step 2. Use this step if you (1) have more than one job at the same time, or (2) are married filing jointly and you and your spouse both work. Option (a) most accurately calculates the additional tax you need to have withheld, while option (b) does so with a little less accuracy. Instead, if you (and your spouse) have a total of only two jobs, you may check the box in option (c). The box must also be checked on the Form W-4 for the other job. If the box is checked, the standard deduction and tax brackets will be cut in half for each job to calculate withholding. This option is accurate for jobs with similar pay; otherwise, more tax than necessary may be withheld, and this extra amount will be larger the greater the difference in pay is between the two jobs."

Since they actually state that (a) is most accurate, then I'd go with that.  Many people don't want to use the calculators or don't have all the info handy to fill in for the calculator to work correctly and just choose (c) since its easy!  But if you are looking to be the most accurate, (a) should be best.  Again, once the changes are made, take a look at your paystubs and make sure you are withholding enough, regardless of which line you choose in Step 2.  That will really be the only way to tell for sure....  (Remember, this year is almost half gone already, so you may need to redo this exercise for the new year.  This holds true even if  you don't change it because you don't mind more being withheld for 2025 as there may be life changes that would impact like a change of jobs, one or both gets a raise, one or both gets a large bonus, dependents, etc.  Just keep that in mind.)