My husband pays into a state pension plan and doesn't pay into SS and also pays minimal federal taxes, so we end up owing a lot of federal taxes. Is this how its supposed to work?

[VolvoGirl]

Is he getting a pension now or still working?  Not paying SS won't affect your tax return.   But he should have federal withholding taken out.  He should talk to payroll and give them a new W4.  

[SC244]

Thanks, thats helpful. He's working and contributing currently. For some reason they are not withholding much federal income tax, I was hoping there was a reason for that, but I guess  not! There are a number of items in box 12.  I Wasn't sure if any of that would help with the federal taxes owed.

[fanfare]

If you work for a small company that does it's own payroll, maybe they are doing it wrong.

Submit a new W-4 and watch the next paystub.

OR

you can make your own quarterly estimated tax payments to the IRS.

[SC244]

Thanks. As far as i can tell the W4 is filled out correctly, thats why i'm asking this question- i don't know what we're doing wrong that would make the withholdings so low and result in us owing taxes. He does pay a minimal amount of federal taxes, but clearly not enough. 

Of course i can instruct them to withhold additional funds, but I'm trying to figure out if there is something else i'm missing, like is the pension payment supposed to count toward taxes or something else. 

We both work for large organizations that run payroll through nationwide vendors. There are 4 items listed in box 12. Would any of them help?

[VolvoGirl · Accepted solution]

The only thing about box 12 is if any of the deductions are pretax.  Then they are not included in the wages in box 1.  So you are not paying tax on them in the first place.  You can usually tell because box 1 will be less than boxes 3 & 5.

Do you have income too?  Maybe the withholding is ok just for his income but if you have other income you pay a higher rate of tax so each W2 might not withhold enough to cover the total income.  Especially if you have dividends or interest and investments.  

[SC244]

Thanks, i think that's probably the right answer. I appreciate your time.

I was just hoping that somehow there would be some hidden payment somewhere that would negate this! The box 12 lines don't correspond to any of the dropdowns in turbotax, so i wasn't sure if there was anything to do with them. 

[VolvoGirl]

Huh?  You have to enter the box 12 amounts.  What doesn't match the drop downs?  They are all there.  They have to match.   Don't get confused by the box 12 labels.  Box 12 is labeled 12a, 12b, 12c, 12d.  Only use the CAPTIAL LETTER for the code.  It is one or two letters like D, E, F or W or AA, BB, DD, EE etc.  

[SC244]

Thanks, and i meant in box 14 Other. Maybe you can help me with this too? Only UA matched a drop down for State Retirement Plan. I didn't know what do with the others, I left them as "other"

I'll note that i uploaded the W2 to turbotax and it didn't pick up any of these, so i manually typed them in. Should i?

We had:

Q: Imputed (non-cash) benefits? i don't know what that means

UA: pretax retirement contributions

UB: Pretax Health and Pretax Basic Life Insurance

UC: Pretax health care spending account contributions and fees 

[KrisD15]

As previously stated, INCOME tax is levied on just that, your taxable income. pre-taxed items should be subtracted from your earned wage, so the tax withheld should work out. 

If you both have HSA accounts, are either of you contributing more than the limit? 

$3,600 each or $7,200 total for both combined. 

Box 14 on a W-2 is informational for the payroll department and not used by tax software. It could, among other things,  report Sick and/or Family leave credited due to covid, but that would be for your information only and helpful if filing as a Self-Employed taxpayer also claiming credits.