ArmchairMillionaire23
Recycles dryer sheets
First off, I know the tax withholding schedule changed back in 2020 but this is the first year it has affected me this negatively.
For the past 10+ years, I've contributed the federal maximum amount into my traditional 401(k) at my j*b. When I filled out my W4 after switching j*bs back in 2011, I claimed zero as I always have and I have always had enough taxes withheld to cover my tax bill. Plus, with the saver's credit, I usually got a small federal tax refund so I thought I was covered.
Then I changed employers in 2022. Filled out a W4 and claimed zero as before, and even managed to get a small refund in 2023 for the 2022 tax year.
Back in June, my current employer switched from doing the company payroll and had an outside accounting firm take over the duties. Not much changed, except my payroll switched to direct deposit, which was nicer than having to cash a paper check every week. Did my taxes this year. Turned out, when the company switched the payroll to the accounting firm, they followed the IRS W4 instructions and marked everybody as claiming one, and if a person was married and filing jointly, they got marked as claiming two.
Unfortunately for me, this was also the time I got some additional help in my position and switched from working 50-55 hours a week down to pretty much 40 hours a week. I noticed that if I didn't have any OT on my check, my federal taxes withheld was zero, but I chalked it up to putting $587 every week into my 401(k).
Well, after doing my taxes, not only do we have to pay in $1400+, my tax software claims I will be hit with an IRS penalty for not having enough taxes withheld. I since re-did my W4 and claimed zero, but on my next paycheck, the federal withholding was still zero. They took out 79¢ more in state taxes, though.
So I (foolishly) went to the IRS website and completed their "Tax Withholding Estimator". After entering our income, retirement contributions, taxes withheld, and everything else they asked for, here's what they suggest I do:
(try not to laugh)
Personal information and filing/marital status
Enter your personal information (Step 1(a) and (b).
Select Married filing jointly or Qualifying surviving spouse filing status (Step 1(c)).
Multiple jobs or spouse works
Please leave all fields on this step blank.
Claim dependents
Enter $6 on Step 3 for Claim dependents.
Other adjustments
Enter an amount of $33,437 on Step 4(a) Other Income (not from jobs). If you downloaded the pre-filled form, this amount has been entered for you.
Sign and date
So even if we both claim zero, not enough is being withheld from our paychecks. So the IRS is instructing me to lie and claim I am somehow making $33,437 in other income (not from jobs).
Does this make sense to anyone
For the past 10+ years, I've contributed the federal maximum amount into my traditional 401(k) at my j*b. When I filled out my W4 after switching j*bs back in 2011, I claimed zero as I always have and I have always had enough taxes withheld to cover my tax bill. Plus, with the saver's credit, I usually got a small federal tax refund so I thought I was covered.
Then I changed employers in 2022. Filled out a W4 and claimed zero as before, and even managed to get a small refund in 2023 for the 2022 tax year.
Back in June, my current employer switched from doing the company payroll and had an outside accounting firm take over the duties. Not much changed, except my payroll switched to direct deposit, which was nicer than having to cash a paper check every week. Did my taxes this year. Turned out, when the company switched the payroll to the accounting firm, they followed the IRS W4 instructions and marked everybody as claiming one, and if a person was married and filing jointly, they got marked as claiming two.
Unfortunately for me, this was also the time I got some additional help in my position and switched from working 50-55 hours a week down to pretty much 40 hours a week. I noticed that if I didn't have any OT on my check, my federal taxes withheld was zero, but I chalked it up to putting $587 every week into my 401(k).
Well, after doing my taxes, not only do we have to pay in $1400+, my tax software claims I will be hit with an IRS penalty for not having enough taxes withheld. I since re-did my W4 and claimed zero, but on my next paycheck, the federal withholding was still zero. They took out 79¢ more in state taxes, though.
So I (foolishly) went to the IRS website and completed their "Tax Withholding Estimator". After entering our income, retirement contributions, taxes withheld, and everything else they asked for, here's what they suggest I do:
(try not to laugh)
Personal information and filing/marital status
Enter your personal information (Step 1(a) and (b).
Select Married filing jointly or Qualifying surviving spouse filing status (Step 1(c)).
Multiple jobs or spouse works
Please leave all fields on this step blank.
Claim dependents
Enter $6 on Step 3 for Claim dependents.
Other adjustments
Enter an amount of $33,437 on Step 4(a) Other Income (not from jobs). If you downloaded the pre-filled form, this amount has been entered for you.
Sign and date
So even if we both claim zero, not enough is being withheld from our paychecks. So the IRS is instructing me to lie and claim I am somehow making $33,437 in other income (not from jobs).
Does this make sense to anyone