How to address unknown tax burden

[Khr77]

For the last three tax years, my wife and I (who file married, jointly with one dependent) have owed taxes at tax season. The initial two years we owed roughly 2-3k. During tax season last year, I spoke directly with a Turbotax representative to figure out the issue. Their opinion was that we needed to redo our W-4s to adjust our tax our respective tax withholdings so we would overcontribute and receive a return for the 2024 tax year. We both followed his advice which was to remove the dependent on our W-4s. However, this year we owe almost double what we owed the previous two years (between 6 and 7k this year). How do I actually figure out what the issue is? Is there a way to assess which one of our jobs is not withholding the desired amount? I've tried using the IRS withholding calculator but it only seems to provide a recommendation on what to withhold in the future.   

[JohnB5677]

The advice the agent gave you will increase your withholdings from your paycheck.

• Did you include your dependent on the ax return?
• You should.
• The W-4 was only to have additional tax withheld, NOT to take away your dependent!

If I misinterpreted this, please reply with additional information.

[Khr77]

Yes, I always claim my dependent when filing my taxes.   I was initially also indicating that I had a dependent on my W-4 (I was claiming a dependent on my W-4 because I have the higher income, my wife would just state that she was married filing jointly on her W-4).  However,  I was told by a turbotax rep previously that this was likely the reason why I was owing taxes when filing.   In other words, he thought that not enough tax was being withheld so (due to our status of married filing jointly and having one dependent) so he advised that we remove the dependent so more tax would be withheld.  

[DianeW777]

That's not a bad idea. A simple solution to having the right amount of tax, if you income stays the same roughly, is to take your balance due, divide it by the number of pay checks remaining and list that as 'an additional amount' to withhold from each check.

For now, if you changed your W-4, don't make changes until you see the difference in your federal withholding. Once you see an adjustment you will know if you need to add a flat additional amount on your W-4 (line 4(c).

@Khr77 

[Khr77]

How can I address the actual issue with last year's taxes though?   Owing 6-7k is a pretty big jump from my previous tax burdens.   Is it possible that one of our jobs is withholding an appropriate amount and the other is not?   If so, how would I determine that?   

[DianeW777]

Yes, it's possible an employer is not withholding the correct amount. Also you should compare your returns line by line 2023 and 2024, to see what exactly changed.  This would include your federal withholding amounts for each of you. It is good to get to the bottom of it.

You can determine going forward whether the correct withholding is done. In the link below is a employer withholding guide that you can use to compare the gross wages of each of you and the pay period. Find the amount each employer is withholding. Notice gross pay and the pay period chart (weekly, bi-weekly, etc)

This will tell you what the employer is taking and allow you to make necessary adjustments. You can make adjustments as many times as you need to and submit to your employer.

• IRS Publication 15t

@Khr77 

[Khr77]

Thank you for that resource.  I went back through my previous returns and found that 2021 was the last year where I received a return.  We were already married and had a kid (and moved) by that point but neither state has state income tax.   We both changed jobs in 2021 too.   It's been a mystery I've been trying to get to the bottom of for a while now but there are so many variables to account for.  

[KrisD15]

As you say, there are a lot of variables.

I suggest you look over Form 1040 (or the year to year comparison) to see what changed. 

Look at your Adjusted Gross Income (line 11)

Look at your tax liability (line 16) 

Next, look at credits you got on line 21 and finally the tax that was withheld on line 25d

If you see any large discrepancies, you might want to dig a little deeper.

[Khr77]

   Diane, 

Is there a service available that would allow for us to set up a call to run through this issue together?   I did a call with TurboTax rep last year but they did not really provide the level of service that I was wanting (they essentially just told me to update my withholding amounts without any in-depth analysis as to what that amount would be).    What I am hoping for is to sit down with a tax expert and run through my previous returns line by line as you suggested and share relevant information about life events that would have contributed to tax changes.  I want to try and identify which one of my wife and I’s employers is not withholding enough tax.   Or potentially identify other sources of income that may be leading to this increased tax burden.  Is that something that is possible and, if so, is there an estimate for how much that might cost?  Thank you!

[AnnetteB6]

You may have touched on the issue yourself - other sources of income.  In addition to your W-2 jobs, do you also have a Schedule C business reporting income on your tax return?  If so, your large balance due could be due to self-employment income and not paying estimated taxes through the year to cover that tax.  Take a look at your Form 1040 line 23 to see if there is amount shown there.  If so, the self-employment tax could be the underlying problem instead of your withholdings.

Using TurboTax Live will allow an expert to review and file your current year return for you.  That is not exactly what you were asking, but it is something to consider.  Take a look at the following articles to learn more:

What if I need my return completely reviewed?

What is an Expert Review and how can I schedule one?

Otherwise, to compare two years together, you may need to find a local tax professional in your area.

@Khr77