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Monks
Level 1

Not enough withheld

I recently realized my husband isn't having nearly enough taxes withheld from his paycheck. I'm afraid we're going to owe ALOT in taxes next year due to this.

1. how do we update the w4 to have more withheld?

2. is there a way to estimate what we should set aside come tax time since we are behind?

His salary is around 45k. I'm at 50k+ bonuses. We file married jointly.

1 Best answer

Accepted Solutions
JoeD_CPA_CFP
Employee Tax & Finance Expert

Not enough withheld

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:

  1. 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
  2. -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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3 Replies
JoeD_CPA_CFP
Employee Tax & Finance Expert

Not enough withheld

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:

  1. 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
  2. -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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KochuK
Employee Tax Expert

Not enough withheld

Hi Monks, thanks for the questions.

 

Below is the re-designed Form W-4 from tax year 2020 and onwards.

Form W-4 Employee’s Withholding Certificate

https://www.irs.gov/pub/irs-pdf/fw4.pdf

 

There are three ways to fine tune your withholdings: both of you

(1)  Submit a newly filled W-4, check Step 2 (c) box, which will increase your withholding and significantly reduce your paycheck;

(2) Go thru Step 2 (b), find the intersection of "higher paying job" and "lower paying job" (chart on page 4) divided by remaining pay periods, enter result on Step 4 (c);

(3) Use 

IRS Tax Withholding Estimator

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

to find out what to enter on Step 4 (c).

 

You can always use IRS Direct Pay to make some estimated tax payments. If pay more than the final tax liability, you will eventually receive a refund come tax time for tax year 2022.

https://www.irs.gov/payments

 

Hope the above helps.

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RDR5
Level 1

Not enough withheld

I have this same issue and am a bit confused still on the timing of catching up...

 

"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)."

 

So if I am just realizing now that I am behind and make a quarterly payment in September, am I considered late with what I should have had withheld earlier in the year? Or is it that as long as I am caught up between additional withholding and one quarterly payment (can I make just one?) by the end of the year there will not be a penalty?

 

Thank you!

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