What Should We Change to Reduce Federal Tax Payments

[rdwill657]

For several years, my wife and I end up owing a large amount of federal taxes. Though we file jointly with only one (1) deduction per our W-4s, the problem is our tax brackets are quite different. She makes only 25% of my income. Our previous payments have been between $1200 and $1600, but this year was terrible, $2600.  Right now we are thinking of filing separately, but we assume more taxes would be taken out each pay period. We really are at a loss as to what to do, because there are so many reviews we read to stay with filing jointly. 

[srubino]

Hello, thank you for your question.  Please see below for our calculator to estimate your W4 witholding form.  Try to fill out to the best of your knowledge and compare with what you currently have in your payroll systems.  If they match, you can submit another W4 and elect extra withholding (Step 4 c on the actual W4 form) at a fixed amount per paycheck.  Hope this helps!

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

[bkaytaxes · Accepted solution]

Hello  @rdwill657

Great question and this is very common when  a married couple has  more than one W-2    Each W-4 does not know how much the tax bracket increases with two incomes,  so we often see amounts owed to the IRS at the end of the year.  Here are a few tips to help prevent that!

1. First use our W-4 Tool:  https://turbotax.intuit.com/tax-tools/calculators/w4/    The new W-4 is different so you may just need to update both your W-4's.  This tool will let you  know how to fill it out to get the proper withholdings.
2. Next check up on your withholds to make sure enough is being withheld so far this year.   TaxCaster:  https://turbotax.intuit.com/tax-tools/  This is an awesome tool that will project if you will owe the IRS based on your current withholding.   Although we are almost into June there is still time to make adjustments!

 If you think you may owe, one option is to adjust the W-4 by having additional money taken out to cover the amount as well as get you on track moving forward.    You can adjust both or just one W-4.  The IRS does not have a preference how you pay during the year. 

I also wanted to mention that Married Filing Joint usually is the best filing status for the majority of tax payers.  You can also see the result of filing separate in TaxCaster!  There are some credits and deduction that are lost when you file Separate. Here is an article for that topic as well: https://turbotax.intuit.com/tax-tips/marriage/should-you-and-your-spouse-file-taxes-jointly-or-separ....  

With this information you both can decide what works for you.  Wishing you best of luck!

[rdwill657]

At this time it is hard to know what will be the right amount. I had two or three months of unemployment, but now I am working full-time. I am sure to tools are very useful and will try them.  Thank you for your response. It was the right guidance for us.