My friend always seems to owe taxes when filing, and we’re trying to figure out why and how to stop it. He owed about $600 last year, and his numbers this year look pretty similar. Is there a way to adjust his withholdings so he doesn’t owe again? Any advice on what we’re doing wrong?
If he’s only owing a few hundred dollars, that’s pretty normal and actually ideal. If he wants to avoid owing, he can add extra withholding on his W-4.
Jules said:
If he’s only owing a few hundred dollars, that’s pretty normal and actually ideal. If he wants to avoid owing, he can add extra withholding on his W-4.
He owed almost $600 last year, and this year looks the same. 
@Merrill
Owing $600 isn’t terrible. He could increase his withholding to avoid it, but that means taking home less money during the year.
Ben said:
@Merrill
Owing $600 isn’t terrible. He could increase his withholding to avoid it, but that means taking home less money during the year.
When I worked at an accounting firm, the partner said owing between $0 and $100 is the sweet spot.
@Noor
Financially speaking, owing at tax time can actually be better. If you pay the minimum required during the year and settle the rest in April, you keep more money in your pocket throughout the year. The problem is most people don’t save, so they’d rather overpay and get a refund.
@Miller
I prefer owing. I withhold less and put the extra money into a high-yield savings account. That way, I have what I need for taxes plus a little extra from interest.
Leif said:
@Miller
I prefer owing. I withhold less and put the extra money into a high-yield savings account. That way, I have what I need for taxes plus a little extra from interest.
That’s the smart way to do it. You end up with more money overall.
Ben said:
@Merrill
Owing $600 isn’t terrible. He could increase his withholding to avoid it, but that means taking home less money during the year.
On that income, $600 is brutal. Are you serious?
@Wylder
Whether you owe $600 or it’s withheld from your paycheck, you’re paying the same amount of tax. The difference is when you pay it. Financially, it’s better to owe at tax time, but people who don’t save find it hard to manage.
@Miller
People making $35k can’t afford to save, so owing $600 is a problem. Don’t blame people for being poor.
Wylder said:
@Miller
People making $35k can’t afford to save, so owing $600 is a problem. Don’t blame people for being poor.
If saving $50 a paycheck isn’t possible, how would they pay the $600 tax bill? The issue isn’t income—it’s financial literacy. I’m not blaming anyone; I’m suggesting ways to help manage finances better.
Wylder said:
@Miller
People making $35k can’t afford to save, so owing $600 is a problem. Don’t blame people for being poor.
If it’s impossible to save, then it’s impossible to pay taxes. The previous comment is right—this is about planning, not income level.
Harley said:
@Merrill
You actually want to owe a little. Getting a refund means you overpaid the government.
A rational economist would owe as much as possible, but most people aren’t good at managing money like that.
If he owes about $150, he could just save $15 a paycheck instead of messing with the W-4. That way, the money stays in his account instead of going to the government early.
Noor said:
If he owes about $150, he could just save $15 a paycheck instead of messing with the W-4. That way, the money stays in his account instead of going to the government early.
I’ll let him know his options tomorrow and let him decide. Thanks for the advice!
How much did he owe last year, and was it federal, state, or local taxes?