- quote -

<Snipped
This happens more often than many non-pros realize. In my
experience, here's why -

Your employer is only allowed to calculate withholding on
your wages, he does not include your spouse's earning. Of
course, your spouse's employer does the same.

When a married couple files W-4s that show "Married - 0
Exemptions" both employers assume that the standard
deduction applies to both of you. Also, the employer's use
the tax rates that apply to your individual incomes. This
causes a gap because once your incomes are combined you may
end up in a higher tax bracket.

For example, say you and wife both make $65,000 each. Both
W-4s are M-0. Here's what happens:

Both employers start with $65,000, then subtract $9,500.
This makes your taxable income $55,500. When your employer
goes to the tax tables he will withhold approximately
$7,625. The first $14K is at 10% and the rest is at 15%.
The same thing happens to your spouse - so you wind up with
$15,250 in Federal withholding.

However, when you file your tax returns your combined
incomes total $130,000. Then you subtract $9500 for the
standard deduction and $6,100 for two personal exemptions.
This leaves you with taxable income of $114,400. Your tax
liability is now $22,120. The first $14K is at 10%, from
$14,001 to $56,800 is at 15%, and the rest is at 25% - Your
combined incomes have just pushed you from the 15% bracket
(where your withholdings were) to the 25% bracket - however
your withholding capped at the 15% bracket. Again, because
neither employer considers what happens with the other
spouse.

My general recommendation for most married couples is this -
withhold as SINGLE with ZERO exemptions. The employers will
withhold more tax and you won't have such a big bill at tax
time.

Good luck,
Gene E. Utterback, EA

<< -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << ------------------------------------------------->

More than $1000 overdue means you should compute and pay
estimated taxes each quarter. When you pay the IRS more than
$1000 this season, they'll send you the 1040ES forms.
Usually the first year of a large shortfall is not
penalized, but future years will be.

If you income is uneven and more of it in the second half of the year
it may be worth it compute estimated taxes the long way. The short way
is to pay one quarter of your shortfall each quarter. The long way is
compute form 2210- the estimated tax penalty. You use this computation
to figure out the minimum needed to avoid the penalty. The 2210 is
essentially to annualize your income-to-date each quarter, i.e. compute
your taxes four times a year. (And fifth on April 15). First quarter
is due April 15.

<< -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << ------------------------------------------------->

- quote -

How did you come to this realization? Have you finished
preparing your return and, if so, are you sure you did it
correctly? Something sounds very strange.

Jan Zobel EA
Oakland, CA

<< -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << ------------------------------------------------->

kevin91822000[at]yahoo.com (Kev) wrote:

- quote -

Marking you both as single will cause more taxes to be
withheld from each of your paychecks.

Generally people wanting to withold as married put down 2
exemptions on their W-4, 1 for themselves and 1 for their
spouse. If both spouses work and mark their W-4's in the
same fashion, then each are withholding for 2 people or 4
withholdings in total. This is why you are underpaying
during the year. Married assumes 2 people, 1 income. Use
the two earner/two job worksheet on the back of the W-4 to
get a more accurate calculation of your withholdings.

<< -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << ------------------------------------------------->

- quote -

It would help if you told us the amounts shown on your W2s
for wages (Box 1) and federal withholding. Also, are you
filing jointly?

<< -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << ------------------------------------------------->

kevin91822000[at]yahoo.com says...

- quote -

Don't base your tax situation on what you owe at the end of
the year. If you are comfortable setting aside money
throughout the year, you are better off owing money each
April than getting a refund.

If only one of you worked you would be in a lower tax
bracket, but with both of you working, you move up a bracket
or two. The advice to file your W-4 (not your W-2) as
"Single" is probably sound. Go to www.paycheckcity.com to
see how your withholding would change.

Gary

--
You can probably X figure out X which letters to X delete to
derive my email address X.

<< -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << ------------------------------------------------->

"Kev" <kevin91822000[at]yahoo.com> wrote:

- quote -

Without more specific information, I don't believe your
question can be properly answered.

Wayne Brasch, CPA, M. S. Taxation

<< -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << ------------------------------------------------->

I just came to the realization that my wife and I owe the
federal govt ~$3000, even though we have no external sources
of income (i.e. income other than our salaries), and we have
0 state and federal Exemptions and have our status as
'Married'. How is this possible?

How do I need to setup my W2 so that I will NOT owe money at
the end of the year?!?!? Someone told me to mark us both as
'Single', but I'm having a difficult time believing it. The
govt just keeps screwing me.

-K

<< -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << ------------------------------------------------->