Hi. I owe some big tax this year, so I must’ve been filling out the W-4 wrong.
I am married and we both are working. One kid.
On Step 2 of the form: I would choose option C, and my wife would do the same on her W-4.
On Step 3: $2,000 for one child.
That’s all we need to do, right? Or do we still need to work out the table and fill out Step 4c? For example: my wife and I both make $90k, so the value on the table is $11,170. Divided by 26 paychecks, it’s $429.60. Do I need to put this $429.60 on either my wife’s W-4 or mine on Step 4c?
If you choose to check the box, then you would both do that and that’s it. Note in Step 2 that it says:
Do only one of the following:
Before listing the 3 options of (a) the IRS withholding calculator; (b) the worksheet; or (c) checking the box on both W-4s.
For the one kid, you can include a total of $2,000 in the Step 3s between you. One of you can claim $2,000; or both of you can claim $1,000 (for a total of $2,000); or you can split it however you want as long as it adds up to $2,000.
What you don’t want to do is both put $2,000, because then you are claiming a total of $4,000 between you, which is too much. You only qualify for 1 child at $2,000.
Honestly, if you are already under withholding, for this year, you should do this:
Step 1 - Box C: Select Single. Why not select Married Filing Jointly? Because you’re worried you under withheld. If you and your wife both pick Married, then they increase the chances of not taking enough taxes out from your checks. The tax rates are approximately doubled anyway, so this will put you ahead of the game.
Step 2 - Skip it. Why? Because not knowing your wife’s income means you’re going to have to estimate it by her direct deposit and guess on what she put down on her W-4. You could take her paycheck’s direct deposit, figure out her net income for the year, and then add that to your income to figure out your tax rate. However, I’d just skip it unless she made significantly more than you.
Step 3 - $0. Choosing $1,000 each or $2,000 total is fine, but if you skip this, you give yourself more room for adjustments at year-end.
Step 4 - Take what you owed last year, divide it by the number of paychecks you get. For example, if you owed $2,000 last year, divide that by 26 to estimate how much extra to withhold.
Keep in mind, a W-4 is best updated at the beginning of the year. If you’re doing this in November, you’ll need to divide what you owe by the remaining paychecks this year instead of the full 26.
@Phoenix
Thanks for the detailed answer. I did an estimation and we owe around $6,000 this year. I just submitted my W-4 to withhold $2,000 each paycheck until the end of the year. I hope we don’t have to deal with an underpayment penalty.
@Bennett
That’s a fairly significant amount of under withholding. Look at your last pay stub and your wife’s to check federal income tax withholding. You may want to make an estimated tax payment before Dec 31st to avoid penalties.