My wife and I make a combined AGI of approximately $225k a year, and for the last several years, we've owed anywhere between $5-$10k dollars in taxes. We have two dependent children, of which I was told to only claim one (or none) to offset some of our taxes to be owed, however when I changed to only a single dependent, and my wife's W4 was set to single, we still owed +$5k last year. Should we think less about playing the dependent claiming game and more about just completing Step 4(c) and have extra withholding taken out. If that is the case, would we just look at tables on pg 4 of the W4 and that's the amount for the year we'd need to contribute as extra to 'break-even'? So for us, it might be the $100,000-$149,000 higher paying job and the $80-$89,000 for the lower paying job, we'd want to contribute an additional $12,920 over the taxable year. Is that an accurate statement?
When you owe more than $1,000 at the end of the year there are two ways to solve the issue and avoid any penalties for underpayment of estimated taxes. You should not be showing any dependents as your income exceeds $200,000 on your W-4. You will also need to put an amount in Step 4 C to have an additional amount withheld. The other option is to make quarterly estimated tax payments. This can be done at IRS.gov or mailing it in with a check with a voucher 1040-es.
**Mark the post that answers your question by clicking on "Mark as Best Answer"