We claimed 0 exemptions in W4 of 2006. But we still owe the feds $2500. How?

Question

thanks for your replies..some generic details...
Gross : 100K.. . tax withheld was arnd 11k... excemptione claimed was "0".
Filing as married- jointly.

thanks again for your inputs.

we did not have any "out of employer" income..both salaried.

Answer 1

I need more specific information to tell you "how" that happened. What was your gross income? Do you have any deductions? Did you take any money out of a retirement plan? All of these are things that can affect your taxes. Also you could be one of the unlucky few that when you combine both your incomes you fall into a higher tax bracket than each of your individual wages would have placed you in.
I hope this helps if you want to put additional information on I would glad to think of the specifics of your situation.

Answer 2

Simple: You didn't have enough tax withheld. Since you say "we" I assume that you are a married couple filing a joint return. There are a number of ways that this can happen.

1. You didn't fill out the 2 worksheets on Form W4 when you prepared them. You need to do that to account for each other's income as well as any other income that isn't subject to withholding such as dividends, interest, capital gains, self-employment income, etc.

2. You had other income not subject to withholding and didn't have additional tax withheld by your employer.

3. You have fairly substantial income, and one of you earns a lot more than the other one does. If one of you has income that kicks you to the higher income tax brackets (25% - 35%) and the other has an income in the 15% bracket, not enough tax will be withheld from the wages of the one with the lower income to cover the total tax liability. Again, the worksheets in Form W4 will help you make the necessary calculations and adjustments.

You, as the taxpayers, are solely responsible for ensuring that sufficient tax is withheld to cover your tax liability. Many folks put that on auto-pilot and forget about it until tax time. As you have learned, that is a major mistake.

Answer 3

Apparently your withholding was still not enough - fill out a new W-4 having an additional $48 per week deducted from one or the other paychecks (or each of you have an extra $24 a week deducted, or something that adds up to $48 a week.

The withholding tables work fairly accurately for the "average" situation, but not for everyone. With two people employed, the numbers can be way off, as you have discovered.

Answer 4

There are lots of possibilities. Without more information it would be pure speculation. Undoubtedly you had material amounts of income over and above what you earned from that employer.

Answer 5

not enough deductions compared to your income. Claiming 0 isn't a guarantee of not owing any taxes!

Answer 6

I would have someone look over your taxes or go online to taxact.com and have them do it. Unless you have made an incredible amount of money with no deductions, there has been a mistake.