company witheld less taxes

[user17577004491]

Hi, 

My husband and I have only W2 income. no other income.

My company or my husband's (i'm not sure) withheld way less taxes last year. we ended up paying over 21K in taxes and had to pay fines as this was unexpected. HOw to rectify this with our companys

thanks

[FranklinF]

Your situation, with a large, unexpected tax bill and penalty, is common for couples where both spouses work. This often happens because the standard withholding calculations for two-income couples can fail to account for how their combined income affects their tax bracket.
 

To rectify this, you or your husband (or maybe both) must submit a new W-4 form to your respective employer(s). The goal is to increase the amount withheld from each paycheck going forward. You can use the IRS's Tax Withholding Estimator to help you fill out the form accurately. 
IRS Tax Withholding Estimator 

Lastly, I do believe it is worthwhile consulting a Tax Professional about the 2024 Tax Returns to see if something was missed that could reduced your Tax Liabilities for that year and perform an amendment of the 2024 Tax Return, if applicable.

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[Terri Lynn · Accepted solution]

Yes, when the withholdings are decrease significantly, this can definitely create an unexpected tax bill. This decrease in withholdings often occurs when employees have submitted a new W4 change, changes jobs, or an employer changes payroll companies,  The solution is to submit new Form W-4s to your employers. The new W4 forms are designed to be more accurate and do include  a specific section for households with multiple jobs. To update your Form W-4, which tells your employer how much to withhold for federal taxes follow these steps:

1. Use the IRS Tax Withholding Estimator: This is the single most important step you can take. The IRS offers a free, online and mobile-friendly tool that will give you the most accurate withholding recommendation.
   • Gather your documents: You'll need your most recent pay stubs and a copy of your last tax return. You'll also need the same information for your spouse.
   • Input the data: The tool will guide you through entering your combined income, filing status, and any other relevant tax information.
   • Get your results: The estimator will tell you exactly how to fill out a new W-4 for each of your jobs to ensure the correct amount of tax is withheld. It will provide a specific amount to enter for additional withholding to get your tax liability as close to zero as possible.
2. Submit a New Form W-4

• Once you have the results from the estimator, you must give your employer a new W-4.
• Complete the forms: Each of you will fill out a new W-4. The most crucial part will be Step 2, which is for multiple jobs or a working spouse. You can either check the box for two jobs or use the estimator's results to fill in the exact amount of additional withholding.
• Give to your employer: Your employer will use this new form to adjust your withholding, and the change should take effect within a few pay periods.

The penalty you paid was an "underpayment penalty." To avoid this, you must pay your tax liability as you earn income, either through payroll withholding or by making estimated quarterly tax payments. The penalty is triggered if you owe more than $1,000 when you file your return.. You can generally avoid an underpayment penalty if you pay the lesser of these two amounts through withholding and estimated payments: 

• 90% of your current year's tax liability: This amount is based on your total tax owed for the current year.
• 100% of your prior year's tax liability: This rule is based on the total tax from your previous year's tax return.

High-income taxpayer exception: If your Adjusted Gross Income (AGI) on your prior year's return was more than $150,000 ($75,000 if married filing separately), you must pay at least 110% of your prior year's tax

 By following the steps above and submitting new W-4s as soon as possible, you can increase your withholding for the rest of the year and lessen how much you will owe with your 2025 tax return.

Helpful Links: 

• W-4 Calculator | IRS Tax Withholding Calculator 2024-2025 
• What is the W4 form? 
• W4 changes to allowances 

Please feel free to reach out with any additional questions or concerns you may have and 

thank you for attending!  Please have an amazing rest of your day!

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[user17577004491]

Thank you for all these details! Its already Sept and if I submit the W4 this month, will I still have to pay penalties for late filing the previous quarters? What is the deadline for paying taxes due for FY 2025?

[Terri Lynn]

Yes, since it is September and you likely did not have enough taxes paid during the year through paycheck withholding or estimated tax payments, you could still face a penalty for underpaying, even if you try to catch up now. The IRS calculates penalties by evaluating your tax payments quarter by quarter, so the shortfall from earlier quarters doesn’t disappear just because you increase your withholding in the final stretch.  That having been said, there are ways to avoid or reduce penalties. Remember the IRS does have "safe harbor" rules that could help you as well:

• The 90% Rule: If your total payments for the year cover at least 90% of your current year's tax liability, you’re in the clear.
• The 100% Rule: If your payments cover 100% of the tax you owed last year, you're safe, too. (Though for higher earners—those with an adjusted gross income over $150,000 last year—the threshold rises to 110%.)

You can use the IRS's Withholding Estimator to make sure your current withholding and any remaining payments will at least meet one of these safe harbor thresholds.  Even though you may still be hit with some penalty, increasing your withholding now will still help to decrease how much tax you will owe and the additional penalties. 

Tax Deadlines

For most people filing taxes for fiscal year 2025, the final deadline to pay any taxes owed will be April 15, 2026.

But if you earn income that isn’t subject to withholding, like from freelancing, side hustles, investments, or self-employment, the IRS expects estimated quarterly payments throughout the year. For 2025, the deadlines were:

• Quarter 1: April 15, 2025
• Quarter 2: June 16, 2025
• Quarter 3: September 15, 2025
• Quarter 4: January 15, 2026

Since the September 15 deadline has already passed, it’s important to figure out what you owed for that quarter and make the payment as soon as possible to minimize any penalties.

For more information see:

• How to determine what to pay and when. 
• IRS Withholding Estimator 

Please feel free to reach out with any additional questions or concerns you may have and thank you for attending!  Please have an amazing rest of your day!

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[AmeliesUncle]

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@user17577004491 wrote:

 Its already Sept and if I submit the W4 this month, will I still have to pay penalties for late filing the previous quarters? 

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If you have your employer take out enough tax to compensate for the entire year, no, there would not be any penalties.

But if you start taking out an extra-large amount now (to compensate for the under-withholding for the first part of the year), you will want to change it to 'normal' in January.