[OnMyWay732]

Hey,

For anyone that can help. My wife started doing some contracting work outside of her normal job. Didn’t make a ton, around $6,500. In order to offset the tax that would be owed, we both changed our allowances at our full time jobs to 0, thinking more taxes would be taken out. We both had pay raises at the time so we couldn’t tell how much more/less is actually being taken out.

Doing our tax returns, it appears that we actually had less taxes taken out than last year, and our personal income before any deductions or the contracting work is around $14,000 more than prior year.

Does anyone know why claiming 0 would have that much less taxes be taken out than PY???

Thanks in advance!

AUD - July 2014 - 76
REG - August 2014 - 82
FAR - November 2014 - 78
BEC - January 2015 - 81

DONE!!!!

Used Becker online. Who needs a text when you can burn your eyes out staring at the screen for months on end?

"Let me tell you something you already know. The world ain't all sunshine and rainbows. It is a very mean and nasty place and it will beat you to your knees and keep you there permanently if you let it. You, me, or nobody is gonna hit as hard as life. But it ain't how hard you're hit; it's about how hard you can get hit, and keep moving forward. How much you can take, and keep moving forward. That's how winning is done!"

[y_u_no_pass]

Well at a job where you only make $6500 you often have very little taken out, so that could be a part of it. Also did you check that your w-2 shows 0 exemptions? Sometimes employers miss the changes. It can be really tough to pay enough when you get a significant raise during a year.

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Sent in Application 3/12/15.
Issued License 3/20/15.
Used CPA Excel solely for all exams.

[Anonymous]

If you income went up, your exemptions went down, and your tax withheld went down, something's wrong! Are you sure you didn't do “EXEMPT” instead of “0” or something like that? I have known people to do that before. I would suggest that you talk to your payroll people and ask them how you can have more withheld, cause I'd hazard a guess that one or the other messed up when they made the change, and when they review their work they may notice that. Can you compare the overall percentage withheld this year vs last year on each of your W-2s and see if one or the other was particularly out of line? (For example, if last year her withholding was 14.5% and this year hers is 10%, you'd know hers was your issue.)

Another option would be to have one or both of you withhold at a flat percentage rate rather than by exemptions. I had one side-job that I knew wouldn't withhold enough to cover that taxes it incurred, so I had them withhold at my highest tax bracket so that I was sure the extra few hundred dollars from that job had enough taxes withheld to cover it.

Overall, the tax on her $6500 will be 15.3% for self-employment tax plus whatever your highest income tax bracket percentage is, so one more alternative would be to figure what you estimate that to be total for the year – say you're in the 15% bracket so it'd be just shy of $2000 for the year. You could simply ask that an extra $80 be withheld out of each of your checks every month, and that would cover your tax for $6500 of SE income.

But to really answer the question, reducing your exemptions and increasing your income shouldn't ever result in less being withheld. There's no valid explanation for it; something was done wrong.

[mla1169]

No something else is going on, changing to zero does not decrease your withholding. One or both of you must have been withholding at the single rate before then changed to married with zero. If you have a hard time figuring out what the effect of a raise should be on your taxes, try a website like paycheckcity.com where you can play around with different scenarios to determine what the effect of changes to your withholding will be.

FAR- 77
AUD -49, 71, 84
REG -56,75!
BEC -75

Massachusetts CPA (non reporting) since 3/12.

[OnMyWay732]

@mla…we got married end of 2013 so 2014 was our first year as married on our taxes.

Yea, I actually worked for 3 different employers for the year. One got bought by a larger, than I left that one for another. When I claimed 0, the companies show it. But besides the 6500, I'm just looking at the jobs that pay takes. These are all hypothetical numbers. In 2013, let's say we made 150,000 and paid 25,000 in taxes. This year let's say this year we claimed 0 and made 164,000, and our taxes withheld were only 20,000. This is essentially the scenario I'm facing and can't figure out why.

AUD - July 2014 - 76
REG - August 2014 - 82
FAR - November 2014 - 78
BEC - January 2015 - 81

DONE!!!!

Used Becker online. Who needs a text when you can burn your eyes out staring at the screen for months on end?

"Let me tell you something you already know. The world ain't all sunshine and rainbows. It is a very mean and nasty place and it will beat you to your knees and keep you there permanently if you let it. You, me, or nobody is gonna hit as hard as life. But it ain't how hard you're hit; it's about how hard you can get hit, and keep moving forward. How much you can take, and keep moving forward. That's how winning is done!"

[OnMyWay732]

@Lilla, yea we definitely did 0. I did it myself to both of our jobs. I am having such a problem understanding what is going on and now we owe over 2,000

AUD - July 2014 - 76
REG - August 2014 - 82
FAR - November 2014 - 78
BEC - January 2015 - 81

DONE!!!!

Used Becker online. Who needs a text when you can burn your eyes out staring at the screen for months on end?

"Let me tell you something you already know. The world ain't all sunshine and rainbows. It is a very mean and nasty place and it will beat you to your knees and keep you there permanently if you let it. You, me, or nobody is gonna hit as hard as life. But it ain't how hard you're hit; it's about how hard you can get hit, and keep moving forward. How much you can take, and keep moving forward. That's how winning is done!"

[Anonymous]

Google the “marriage penalty”. Once you hit a higher earner tax bracket you'll have to withhold more than ” married zero “. It happens when your combined salaries put you in a higher bracket than those salaries taken alone. We feel your pain. Our tax bill for 2014 is almost $5,000 and will continue to get worse as my husband just got a substantial raise. Currently figuring out which tax shelter to use in combination with sending extra $$ to the IRS each month.

Edit: sorry, I misread your post. I'll leave this here anyway for informational purposes so people planning to get married aren't blindsided like we were… it was a sad day.

[OnMyWay732]

@brooks I hear you completely, but what I'm having trouble understanding is once we claimed both claimed married 0, we had a substantial amount of less taxes withheld than when we were both at single claiming 1

AUD - July 2014 - 76
REG - August 2014 - 82
FAR - November 2014 - 78
BEC - January 2015 - 81

DONE!!!!

Used Becker online. Who needs a text when you can burn your eyes out staring at the screen for months on end?

"Let me tell you something you already know. The world ain't all sunshine and rainbows. It is a very mean and nasty place and it will beat you to your knees and keep you there permanently if you let it. You, me, or nobody is gonna hit as hard as life. But it ain't how hard you're hit; it's about how hard you can get hit, and keep moving forward. How much you can take, and keep moving forward. That's how winning is done!"

[Anonymous]

The married to single is your big change, then. If you scroll down a bit from here: https://www.irs.gov/publications/p15/ar02.html#en_US_2015_publink1000254685 you'll find the withholding tables. The charts don't go up high enough to pretend the $150k was split evenly between you two for an each averaging $6250 per year, so we'll use a monthly pay of $5040 (which would be about $121k per year combined). At that pay rate, Single and 1 would withhold $783; Married and 0 would withhold $575, so last year you would have withheld combined $18792 and this year combined $13800. Getting married in 2014 is what killed your withholdings. If you came out just owing $2000, you're actually doing pretty good.

EDIT: The PDF is easier to find things in than the HTML version – Page 59 here: https://www.irs.gov/pub/irs-pdf/p15.pdf starts monthly withholding figures.

[OnMyWay732]

Well it was end of 2013 but I think we put married on our w-4 starting 2014.

So Married claiming 0 taxes out less taxes than Single claiming 1? It seems they need to update the rules. What I gather is they believe there is only one person working so when you are married it is as if I have 1 exemption (my wife) when she is in fact working and don't need all those taxes in my paycheck.

AUD - July 2014 - 76
REG - August 2014 - 82
FAR - November 2014 - 78
BEC - January 2015 - 81

DONE!!!!

Used Becker online. Who needs a text when you can burn your eyes out staring at the screen for months on end?

"Let me tell you something you already know. The world ain't all sunshine and rainbows. It is a very mean and nasty place and it will beat you to your knees and keep you there permanently if you let it. You, me, or nobody is gonna hit as hard as life. But it ain't how hard you're hit; it's about how hard you can get hit, and keep moving forward. How much you can take, and keep moving forward. That's how winning is done!"

[Anonymous]

Pretty much. The tax brackets for MFJ are essentially double those of Single, so 2 people making a roughly equivalent wage will have the same taxes due (but not same withheld) when filing MFJ as filing single. What would really be good would be for payroll folks to know enough about taxes to sit down and work out appropriate withholdings with everyone, or for tax preparers to advise a tax withholding percentage instead of these exemptions and tables; however, filling out a W-4 with a simple formula (basically, “How many people are in your house?”) is so convenient that it's stayed the norm. 😐 There are still households with a single income or with one substantially larger than the other, but they're not normal enough to have a single set of tables for “married” and not ask any questions beyond that.

[OnMyWay732]

Thanks for everyone's help. This sucks but I'll just withhold more money and have to pay this amount for now

AUD - July 2014 - 76
REG - August 2014 - 82
FAR - November 2014 - 78
BEC - January 2015 - 81

DONE!!!!

Used Becker online. Who needs a text when you can burn your eyes out staring at the screen for months on end?

"Let me tell you something you already know. The world ain't all sunshine and rainbows. It is a very mean and nasty place and it will beat you to your knees and keep you there permanently if you let it. You, me, or nobody is gonna hit as hard as life. But it ain't how hard you're hit; it's about how hard you can get hit, and keep moving forward. How much you can take, and keep moving forward. That's how winning is done!"

[juuustin]

Unless you are getting hit with a penalty, owing money at the end of the year is not a big deal. You said it yourself that more should have been withheld, so it isn't like you are “losing” $2,000 that you think you are entitled to.

MD Candidate: 10/1/14

FAR - 87 (11/23/14)
REG - 87 (1/30/15)
BEC - 89 (4/19/15)
AUD - 98 (5/30/15)

Ethics - 100

Experience - In Progress!

[Anonymous]

I do a second job facilitating classes online so what I did was estimate what I would make for the year and how it would affect my yearly income for tax purposes. I then determined an amount to add to my W4 as an additional withholding. This way I am sure that amount, no matter what will be deducted for fed taxes each pay period. I did this for my state as well. There had been changes in the tax tables over the last few years which may be why you are seeing some changes in the amount withheld last year in comparison to the year before.

[OnMyWay732]

Appreciate the input. It's not that I think I'm entitled to it, I just didn't know that Married claiming 0 takes out less taxes than Single claiming 1

AUD - July 2014 - 76
REG - August 2014 - 82
FAR - November 2014 - 78
BEC - January 2015 - 81

DONE!!!!

Used Becker online. Who needs a text when you can burn your eyes out staring at the screen for months on end?

"Let me tell you something you already know. The world ain't all sunshine and rainbows. It is a very mean and nasty place and it will beat you to your knees and keep you there permanently if you let it. You, me, or nobody is gonna hit as hard as life. But it ain't how hard you're hit; it's about how hard you can get hit, and keep moving forward. How much you can take, and keep moving forward. That's how winning is done!"

[Liss, Master of Coin]

Im not looking at a w4, so I may be forgetting the exact terms. but I believe there is the option to withhold at a ‘married filing separately' which should mean the employer will withhold more than just ‘married'. And there is also the box that you can put down a dollar amount so they withhold extra money, in the amount you specify.

CPA (MA, Non-Reporting)

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