Owing taxes

[castillob01]

I keep having to pay taxes every year. When we start taxes and I input my W-2 information we end up having a refund. I then add my husband’s W-2 and we owe about 3,000. Should we file separately? We are both taking 12-15 % for our 401k and I am taking an extra 95.00 a paycheck out for federal taxes. 

[xmasbaby0]

The order in which you are entering your W-2's has nothing to do with it.   You are not having enough tax withheld---that is why you owe.

WHY DID MY REFUND GO DOWN WHEN I ADDED ANOTHER W-2?

You started off with your first W-2 and your refund looked high?  Then you added another W-2 and it stopped looking so good? That is normal.  When you added more income, your tax liability increased, so you saw your refund decrease.  The program began by giving you your standard deduction—- which lowered your taxable income.  (if you are filing joint it took $27,700 off your income right off the bat)   So you are not being taxed on as much of the income on that first W-2.  Then you added taxable income--so the refund went down. Your refund (or tax due) is based on the total of your income, not “per W-2.”  

And…adding income may affect other credits you were getting like the earned income credit.

Wait until you have entered ALL of your income and credit/deduction information.  You can't really tell anything until it is all entered.  That “refund monitor” does not mean anything until everything has been entered.

https://turbotax.intuit.com/tax-tools/calculators/w4/ 

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

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

[xmasbaby0]

"should we file separately?"

If you were legally married at the end of 2024 your filing choices are married filing jointly or married filing separately.

Married Filing Jointly is usually better, even if one spouse had little or no income. When you file a joint return, you and your spouse will get the married filing jointly standard deduction of $29,200 (+$1500 for each spouse 65 or older)  for 2024. You are eligible for more credits including education credits, earned income credit, child and dependent care credit, and a larger income limit to receive the child tax credit. 

If you choose to file married filing separately, both spouses have to file the same way—either you both itemize or you both use standard deduction. Your tax rate will be higher than on a joint return.

 Some of the special rules for filing separately include: you cannot get earned income credit, education credits, adoption credits, or deductions for student loan interest. A higher percent of your Social Security benefits may be taxable. Your limit for SALT (state and local taxes and sales tax) will be only $5000 per spouse. In many cases you will not be able to take the child and dependent care credit. The amount you can contribute to a retirement account will be affected. If you live in a community property state, you will be required to provide additional information regarding your spouse’s income. ( Community property states:  AZ, CA, ID, LA, NV, NM, TX, WA, WI)

 If  you are using online TurboTax to prepare your returns, you will need to prepare two separate returns and pay twice since with online, you get one return per fee.

https://ttlc.intuit.com/questions/1894449-married-filing-jointly-vs-married-filing-separately

https://ttlc.intuit.com/questions/1901162-married-filing-separately-in-community-property-states

https://ttlc.intuit.com/questions/1894449-is-it-better-for-a-married-couple-to-file-jointly-or-separ...

[evelynm]

Every year many taxpayers are surprised that they owe additional income taxes even though their employer withholds taxes.  This is not as uncommon as you may think, and there are many reasons why it could happen.

Remember when you first started your job and your employer had you fill out a W-4 form? Well the more allowances you claimed on that form the less tax they will withhold from your paychecks. The less tax that is withheld during the year, the more likely you are to end up paying at tax time. But you can avoid this happening again by making changes to the form W-4.   This article has further details:  Why do I owe Federal taxes? 

TurboTax has a great tax tool to estimate your taxes and even prepares a W-4 to provide to your employers:  Taxcaster 

You mentioned possibly married filing separately - typically this does not result in tax savings.   Likely one of you is a bit under withheld.   You can run the taxcaster as Married Filing Joint and again as Married Filing Separately to check on this.    A couple may pay the IRS less by filing separately when both spouses work and earn about the same amount.   This link has additional information:   when-married-filing-separately-will-save-you-taxes