My wife and I file Married jointly. On my W4 & G4 I claim zero dependents/allowances, and pay additional $100 Fed & $50 State in taxes. My wife started new job in 2020, and we did the same for her W4 & G4 forms but without the additional money payout. So that's 0 dependents /allowances for here as well. The reason for this is because I have a side self employment job where I get a 1099-NEC (no taxes withheld), and before this new job with my wife we would owe until we itemized. But I knew this extra additional money from her would really put us over the top, and I'm want to avoid owing taxes. The problem is when she got her W2, only approx. 2% of federal taxes was taken for the year. So that's 2% (590+ dollars) of about 30k for the year. How is that possible, if she filed Married jointly, but zero on dependents and other adjustments? any Idea?
For state (Georgia) about 6.5% was taken for the year. My goal is to have the max amt taken.
Yes. Your self-employment income was not taxed, no deductions claimed, and no dependents were some of the factors that triggered high tax liability. Even if your filing status was married filing joint, your tax withholding may not be enough to cover your tax liability. The following are few ways to lower tax liability and additional tax assessment.
- Contribution to employer qualified retirement plan such as 401K or at any banks.
- Submit a new W4 to change withholding exemption on your federal and State of Georgia.
I agree with what you have listed, but i think I need to clarify. I agree that I need to lower my tax liability, which i am doing with high 401K deductions, and the additional tax withdraws I've added via my W4 & G4. Unfortunately my wife job doesn't offer 401k deduction, which I understand I can make outside of her job. That aside and even removing the additional self employment money from the equation. The issue is with my wife's W4 & G4, and the small amount of tax taken from her check.
I don't understand, besides a potential error from her companys payroll dept. why only 2% Fed. tax would only be taken for the year if she has submitted a W4 form with zero dependents/allowances listed. The reason for submitting the zero dependents/allowances, was to increase the amt of taxes taken out of her check to help compensate for a high tax liability. That's the problem. Would the IRS not allow a higher tax withdrawal from her check, because we file jointly and I am already having the highest amt taken from my check possibly?
You have focused on the dependent deduction on the W-4. Since 2018 we no longer get a dependent tax exemption deduction, so the impact is reduced.
The more significant issue is reflected in Step 4 of the W-4. This sections provide for other income that is earned in the household. Both you and your wife should update your W-4's to reflect your spouse's income and self employment income.
Be aware that not only is self-employment taxed as income, but there is a additional 15.3% tax for Social Security and Medicare.
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