On my w4, I took 0 deductions and also indicated that I should be taxed on an additional 5K of income, but after uploading our w2s, my husband and I are still 8K short on our taxes.
Not sure what else can be done? Why isn't the withholding a bit more accurate so we can avoid these shocks (not expecting it to be exact but 8K is a huge difference!)
Yes, that is really far off.
You can enter an extra flat amount to be withheld from every paycheck on line 4(c) of Form W-4. You can use the W-4 withholding estimator from the IRS to generate a new form for you. Follow this link for that.
Hi Julie, thanks for responding but if you look at my question that I posted I indicate in there that I already am deducting an extra $5000 in my W-4 by the means that you described.
Which would mean that if I hadn’t done that, things would still be off by over 13K in terms of auto-calculating what to properly withhold for taxes. Another variable that might be factoring is the fact that by September or October it stopped withholding money for Social Security because it had met the limit?
No the social security wouldn't affect that. But since you have a high income you probably have other income like interest, dividends, investments? You might consider sending in extra quarterly estimated payments to cover the higher tax on the higher income and on any income that doesn't have withholding taken out.
It sounds like one or the other of you is making enough income to jump the tax bracket up from 12% to 22% or 24% to 32%. For example, if you're each making 50k the payroll software thinks withholding 12% ($5000) is enough ($10k for the household)...but you're making $100k household income ($50k EACH) so in reality $20k of withholding is needed...I'm super generalizing here...I realize there are personal exemptions, last dollar bracket and what not. If one of you is making $25k and the other $75k then the $25k spouse really is getting screwed by the payroll software.
I know you said withholding $5000 extra...probably should be more like $500 per pay period.
Really appreciate the input here. We’re going to be talking to an accountant soon about this. I think you’re right… there’s probably a tax bracket we’re jumping to once our incomes are combined. Maybe we need to consider filing separately