We messed up with our taxes … what now?

General
1

I just found out my company barely withheld federal taxes from my paycheck this year—only $300. I thought it was a mistake on my end, so I had my husband check his, and his company only withheld $700 for the entire year. We’ve been filing the same W-4 every year, so I don’t know what went wrong.

Here’s our situation:

  • I make $70k, and so does he.
  • State taxes were deducted correctly.
  • We have two kids under 13, no after-school childcare.
  • Both of us pay for health insurance (he has an HSA; I have an HRA).
  • I have $50k in student loans (no payments for months), and he’s paying off a car.
  • We rent our home and don’t own property.
  • Occasionally donate to charity, but nothing major.

I’m estimating we owe anywhere between $15k to $30k. Does anyone know how bad this could be or have any advice on what to do?

2

This happens more often than you think. You’ll likely need to correct your W-4s for next year and set up a payment plan with the IRS.

You both probably filled out the W-4 as if one of you doesn’t work, which makes the system calculate less withholding. It assumes $70k income, subtracts the $29k standard deduction, and figures about $500 in tax after child credits. Double-check how you filled it out to avoid this next year.

3

@Rain
It might be easier to just file as single on the W-4. That usually fixes the issue unless your incomes are really different.

4

@Rain
Why would they need a payment plan? The money wasn’t withheld, so they’ve already been paid more in their checks. They should have the money.

5

Noah said:
@Rain
Why would they need a payment plan? The money wasn’t withheld, so they’ve already been paid more in their checks. They should have the money.

People don’t usually save extra cash for taxes unless they know about it. The money was likely spent.

6

@Kinsley
But it’s their money. If they spent it, that’s on them, not the IRS.

7

Noah said:
@Kinsley
But it’s their money. If they spent it, that’s on them, not the IRS.

It’s not about blame—it’s about most people not planning for something they didn’t realize was happening.

8

Noah said:
@Kinsley
But it’s their money. If they spent it, that’s on them, not the IRS.

People spend their paychecks on bills and other needs. It’s human nature, not an excuse.

9

What are your pretax deductions like—401k, HSA, health insurance? Also, how did you estimate $15k to $30k?

10

Joss said:
What are your pretax deductions like—401k, HSA, health insurance? Also, how did you estimate $15k to $30k?

I’m still working through those numbers. He takes out about $100 per paycheck for his HSA, $300 for health insurance. Mine is $150. Not sure about his 401k. I used ADP’s estimator, which showed a refund of -$15k after I entered the numbers. Then I calculated missed deductions, estimating $30k for the year. I’m definitely no expert in this.

11

Are you saying you’ve always filled out the W-4 the same way, but this year your withholding dropped to almost nothing for both of you?

12

Indy said:
Are you saying you’ve always filled out the W-4 the same way, but this year your withholding dropped to almost nothing for both of you?

Yes, and the only change was my employer switching payroll systems two months into the year.

13

@Bailey
Check pay stubs before and after the payroll change. It might have reset your W-4 info. Weird that state taxes are correct but not federal.

14

Probably 13% federal.

15

Zola said:
Probably 13% federal.

I thought we were supposed to withhold 23%?

16

Bailey said:

Zola said:
Probably 13% federal.

I thought we were supposed to withhold 23%?

No, it’s based on tax brackets. For $128,388 pre-tax income, here’s a rough breakdown:

  • $27,700 standard deduction
  • $100,688 taxable income
  • 10% on the first $23,200
  • 12% on the next $71,100
  • 22% on the rest
    With child tax credits, you’ll owe about $8,257.
17

You’re not doomed. You’ll owe some money, but you can work out a payment plan if needed. At least now you know, so you can prepare instead of being blindsided.

18

Compare last year’s tax forms. Your liability is likely similar unless your income changed significantly.

19

You and your husband should call payroll and update your W-4s immediately. If possible, have 100% of your last paychecks for the year withheld. This will help a lot since the IRS treats end-of-year withholding as if it happened throughout the year.

20

@Maxwell
This advice is valid, but it’s pretty late in the year to make a big difference.