Tax Question

[leebee]

I suspect that an employer withheld federal taxes incorrectly. While the amounts taken out for state, social security, and medicare seem appropriate, the federal withholding is about 1/10th of what it should be. Being as ONE W4 was filed with the employer and only one job was held (so it's not like there is a second W4 for a part-time position or something), how could the federal withholding be so much less than the others? We are going to get seriously slapped by the IRS this year. (and yes, we are panicking and trying to get an appointment with HR...)

 

[amcnj]

Was this a new job? If not, they did the withholding correctly in the past? I have had minor fluctuations from year to year, I assume due to changes in the tax tables and /or standard deduction amounts, but never a huge change.

I have run into problems when the withholding is calculated assuming that a job is the only one in the household, but when combined with other income really needs a much greater amount taken out each pay. So I have submitted w-4’s requesting an additional flat amount be withheld.

Sometimes a part time job can have almost nothing withheld for federal due to the relatively low amount of earnings. But when your total income picture is taken into account, that amount needs to be much higher.

 

[HopperFan]

Any chance the company changed payroll/HR management companies. My DH was working for a company that changed part way through the year and NONE of their year to date transferred over. It was like everyone was a new hire for the company. He ended up with 2 W2 and worse yet they ended up pulling over the allowed 401K amount so had to reverse some of it. What a mess.

 

[lanejudy]

Are you able to look at an individual paycheck/stub and see look up the federal withholding on the tax tables? It may not be exact but should be in range. It sounds kind of like the wrong withholding was done -- maybe withheld as a monthly paycheck instead of weekly, or even at the married rate instead of single.

Was this noticed at all during the year? It sounds like you expect the Fed. withholding to have been at least as much as "the others" (is that Soc. Sec., Medicare, state withholding?). In today's world of direct deposit and electronic paystubs/notices, it's easy to get complacent and avoid looking at the notice while they pile up in the inbox, but it's really important every January to check how that all aligns.

Was there a large bonus or something that wasn't taxed properly? Those are usually taxed much higher than usual.

Good luck sorting it out!

 

[MICKIMINI]

Not that this will help, but we have extra taken out every paycheck for DH. His company takes out a very small amount in comparison to what he earns. We are waiting for acknowledgement that they are taking out an additional amount each paycheck going forward.

I did our taxes last week, haven't filed yet but we have about $500 coming back and that was too close IMO.

That is a rough one leebee as there isn't much you can do but pay the bill. Sorry that happened.

 

[leebee]

She changed jobs in April, a different job in a different location but still with the same company. She asked if she had to change anything, file another W4, etc., and was told no. It's one of the things I don't like about electronic deposit; unless you are diligent and check each pay "stub" you really don't notice this kind of thing. Someone said that maybe they'd had her as an independent contractor rather than as an employee. (which she wasn't, but it was a home health kind of job where she worked from home and on the road- I've read that companies will do this rather than pay their share of employment taxes, even though it's illegal) Still doesn't make sense that the rest of the automatic withholdings are within the acceptable range and not the federal but... I don't know. Hopefully she'll get an answer and get it straightened out, but it won't help with the tax bill, or with the "hole" in her budget that'll be left when the proper taxes are withheld. I just don't understand how most of them are right and the fed withholding is so grossly incorrect.

 

[lanejudy]

it was a home health kind of job where she worked from home and on the road

Is it possible they deducted mileage before withholding the federal tax? Or other work-related expenses? I'm not sure that's the "correct" way to do it, but if she travels between patients' homes the mileage is deductible as are some other expenses.

In any case -- she should file a fresh W-4 immediately so as not to have a similar problem next year.

 

[MICKIMINI]

She changed jobs in April, a different job in a different location but still with the same company. She asked if she had to change anything, file another W4, etc., and was told no. It's one of the things I don't like about electronic deposit; unless you are diligent and check each pay "stub" you really don't notice this kind of thing. Someone said that maybe they'd had her as an independent contractor rather than as an employee. (which she wasn't, but it was a home health kind of job where she worked from home and on the road- I've read that companies will do this rather than pay their share of employment taxes, even though it's illegal) Still doesn't make sense that the rest of the automatic withholdings are within the acceptable range and not the federal but... I don't know. Hopefully she'll get an answer and get it straightened out, but it won't help with the tax bill, or with the "hole" in her budget that'll be left when the proper taxes are withheld. I just don't understand how most of them are right and the fed withholding is so grossly incorrect.

DH gets the same pay with each check so I would know immediately if something was off. They take out 20% for any bonus or extra pay. I have him print a paystub every once and awhile mostly so I can check on PTO.

It sounds to me that someone made a mistake doing payroll. They will likely say "sorry" and that is it. I hate all this computer stuff too...always a "glitch", right?

 

[LuvOrlando]

Oh no, that is a terrible thing to have happen. I think they have payment plans which might help some. if it was me I would make an appointment with IRS right away to show good faith that you are doing your best to figure out what, if anything, is off. An appointment won't undo things but it shows no-one is trying to avoid paying taxes which is a crime all by itself, to me it is better safe than sorry and the IRS just generally scares the hell out of me.

 

[_19disnA]

Not totally clear on the issue. Everyone who has a job gets an annual W2 form from their employer that shows the total amount of wages/taxes/etc. for the year. W4 is form you submit to HR relating to how much to withhold from each paycheck. When you get your regular paycheck is the time to see if there is anything that doesn't look right, especially when you first start a new job. I wouldn't wait until the end of the year to realize something is wrong with the amount of withholding. The 2024 tax year has ended so I doubt you can do anything to fix what happened in the past unless her employer made some obvious error in how taxes were being withheld.

 

[leebee]

She's filing a new W4 to make sure that everything is withheld correctly. HR didn't have any explanation as to why they didn't withhold the federal at the same rate as everything else. I can't figure it out.

 

[DisneyDebbie]

I started a new full time job in 2023 and didn't do a great job of looking over my 'stub' , come tax time I noticed there was not nearly enough federal taken out and we owed that year... Since then I've had my employer take out a set amount additional each week. I don't know why my prior jobs didn't need additional taken out

 

[princesscinderella]

She's filing a new W4 to make sure that everything is withheld correctly. HR didn't have any explanation as to why they didn't withhold the federal at the same rate as everything else. I can't figure it out.

Did she contribute to a significant amount of her paycheck to 401(k) retirement plan? That reduces taxable wages and would affect her witholding, SS and Medicare are taxed at the actual wages rate so those boxes would look correct. One of my employees questioned why her taxable wages was less than her ss/med wages and this was the reason.

 

[Allison]

I'm not sure what you mean by "at the same rate". The rates are different. Have she checked how much was being withheld each pay period and compared it to a tax withholding table to see how much it should be?

 

[georgina]

I hope you will update us with how this was resolved. Since we are retired I pay quarterly estimated taxes, and noticed DH's pension company screwed up one month and didn't withhold enough. I was able to increase my estimated tax payment to compensate, knowing there are penalties for underpaying our estimated tax. I hope it works out OK for her.

 

[longboard55]

It will just be some interest, not a big deal. IRS is just big computer, they will send you a bill. Don't even think you can make an appointment with the IRS, those days are long gone, they are way too far undersaffed