how is it possible to OWE on Fed Taxes when exemptions are set at zero?

Question

we are married filing jointly. our only income is standard employment income paid by our employers, and taxes are dediucted from our pay check. we have exemptions set at zero. yet, it looks like we will owe $4k! If i have taxes set to take out maximum per pay check how can I possibly still owe? I'm confused.

Answer 1

The W-4 doesn't cover all cases, and assumes the couple isn't pushed into a higher bracket more than one exemption or so.

For example, if separately you are in the 15% bracket, but jointly you are in the 25% bracket, and you each have taxes taken out at slightly more than the 15% bracket, then it is easy to owe a lot of tax using the W-4 directions.

If one of you hasn't worked the full year, this can also skew the amount withheld because the withholding tables put the part-year employee in a lower bracket than they actually are.

You should revise your W-4s by adding an additional amount each pay period, over and above what is already taken out. Plus switch to "Married but withhold at the higher single rate."

Monitor your withholding against your estimate of tax owed, and have some extra money taken out toward the end of the year if you are coming up short.

Answer 2

zero allowances isn't the most you can have taken out, you can have additional amounts taken out if you request it.

That said, I'd go back over your numbers - owing that much, with zero allowances claimed against all your income, just doesn't sound right unless your employer messed up and didn't deduct at the zero allowances rate. Be sure you're using the table or chart for married filing joint - it's easy to get into the wrong column and see numbers that are a lot higher.

If you want to email me the numbers for each of you for total income, and withholding, I can run the numbers and see what I come up with.

Good luck.

Answer 3

Your yearly deductions just don't meet your taxes due. Zero deductions doesn't mean taxes or laws don't change throughout the year.

I would suggest looking further into your finances and seeing what else may be causing this. A way to not owe in the future is to claim zero exemptions and finding other ways to offset, which includes but is not limited to donating to charities (even throwing some clothes to Goodwill is claimable as a deduction), and starting a company 401k or b retirement plan.

Answer 4

Claiming zero won't necessarily keep you from owing money, it's a matter of how much you make, so you guys must be making pretty decent money to owe that much. All you can do is try to minimize your taxable income by tax deferred 401K's or other means. Talk to a tax adviser on other methods to reduce your taxable income.

Answer 5

If one of you made substancially more money than the other, you can end up owing even with 0 on your W-4. To fix this, go through the calculations on the back of the W-4 to see how much additional you need to have withheld from each paycheck.

Answer 6

Exemptions are no guarantee that you won't owe. You would have been better off if you actually had exemptions!
But I don't see how you can owe if you had the "maximum taken out".
Are you sure you didn't make a math error?...Because, that's what I'm guessing you did.

Answer 7

Are you having taxes withheld at single zero or married zero??? Single zero will take out the most. The majority of people think that if they are married, they have to put married on their W-4, but you can put single.

Answer 8

Being married one or both of you should have marked the take out as a single rate on the w-4......they are assuming you are married and the spouse is not working so the lowest rate was used.

Answer 9

I think Tish may have hit the nail on the head with this one. Did you keep a copy of your W-4's?

In any case, you might want to consult a tax professional for a second opinion.