Hi Monks,
There are several ways to address this problem, and I will start by answering your questions.
Q#1- To update your W-4, you must contact the Human Resources/Payroll Department of your husband's employer. Here is a link that has a withholding calculator and a downloadable W-4 with instructions. This will only cover the remaining income for 2022. Tips for Updating Form W-4 After Doing a Paycheck Checkup
Q#2- To determine how much to set aside to cover the under-withheld tax, use this link to calculate your tax liability for 2022, Turbo Tax's Taxcaster!
Once you determine the shortfall you have a couple of options:
- Pay the tax to the IRS on the next two estimated tax deadlines 9/15/22 & 1/15/23. Here is a helpful article about Estimated Tax Payments. To create an account to pay the tax go to https://www.irs.gov/payments
- -or- Add additional withholding on the W-4 temporarily through the end of the year to cover the shortfall on line 4(c) of the W-4. See Form W-4.
If you look at your TY 2021 Form 1040 line 24 (total tax) and compare it to the amount of tax you have paid or had withheld in for 2022, you can see if you will owe a penalty. If you didn't pay enough tax throughout the year, either through withholding or by making estimated tax payments, you may have to pay a penalty for underpayment of estimated tax.
Generally, most taxpayers will avoid this penalty if they either owe less than $1,000 in tax after subtracting their withholding and refundable credits or if they paid withholding and estimated tax of at least 90% of the tax for the current year or 100% of the tax shown on the return for the prior year (line 24), whichever is smaller.
As long as you pay in and/or have withheld enough tax to equal 100% of the prior year's tax liability there will be no penalty and you have until the due date of the 2022 return to pay the tax (with certain exceptions). Here is an article to provide additional information Topic No. 306 Penalty for Underpayment of Estimated Tax.
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