General withholding question

[drporter1976]

Hopefully a simple question but I cannot wrap my head around it.

You pay federal taxes based on how much taxable income you make. Hypothetically speaking, you make $60k a year. That puts you in the 12% tax bracket. Your spouse makes $60k a year and that puts them in the 12% tax bracket. You also have an annuity of roughly $26k a year and that also ends up being in the 12% tax bracket. Based on each one of these salaries, the amount withheld is appropriate, roughly 12%. The problem becomes if you choose to file married filing joint. You add all of these salaries together and you get roughly $146k of taxable income for that year. Minus the standard deduction, roughly $28k of the remaining salary will be taxed at 22%. This unfortunately most likely will result in paying less in taxes than one should pay. How do you rectify this knowing each year you are never taxed enough and are going to have to pay the IRS each year you file? I guess you could always request to have more withheld each paycheck but that seems a little excessive given the fact that you may not want the IRS to hold onto your money tax free for the year. Any advice?

[Opus 17]

In general, if you prepare the W-4 correctly, this will be taken into account, at least as far as wages is concerned.  When changing jobs, or adding a new job, you should prepare new W-4s for all the jobs.  Follow all the instructions and include all the worksheets on all 4 pages of the form, including the worksheet for multiple jobs.  Use the results of the calculation to update your W-4s at all your jobs.  Or, use the IRS online calculator to determine what to put on the W-4s.

https://www.irs.gov/individuals/tax-withholding-estimator

For the annuity, you can generally have any amount withheld that you want, you just have to tell the payer.  If you know your overall income will be in the 22% bracket, ask for 22% withholding.

(In your example, $120K of wage income minus the standard deduction results in $90,800 of taxable income, so that's all in the 12% bracket.  If you then add another $26K on top, most of that will be in the 22% bracket.  So you need to tell the bank or broker to withhold that much.)

[VolvoGirl]

Either have more withholding taken out of all payments or you can send in quarterly estimated payments.  You probably also have interest and dividends that don't have any withholding taken out.   Turbo Tax can help you figure how much estimated payments to send in and how to fill out a new W4 for withholding.  Maybe one of you should fill out a new W4 as Single to have more taken out.  I always claimed Single at work even though I am married.