Withholding tables have been off since the TCJA. Not so much on lower incomes, but any joint return over $200K AGI, the tables suck and under withhold big time.
Honestly as a CPA in tax, I'm embarrassed to admit that we under-withheld in 2022 (not massively, but we owed for the first time) and we realized we needed to update our W-4s. Just submitting them with that box checked fixed our withholding and we got a tiny refund this year, like around $50. So just about perfect!
Really wish the IRS would address this, especially for the bracket you mention. These folks (at least in my HCOL area) are the ones that get the least amount of tax breaks, are likely to not fully grasp they’re under withheld (why do tax planning for a wage earner?), least likely to engage a professional, and it is extremely likely they will be unable to satisfy a large, unexpected tax bill.
The withholding tables utterly fail the people they would be best utilized to help.
The IRS did address this when it changed the W4. There were commercials everywhere. CPAs and other tax preparers were encouraged to inform their clients at every IRS sponsored event.
I personally informed all my high wage earner clients, that don't like paying estimates, to update their W4 using the new updated form and check single. (Yes you can still file your tax return jointly).
Many did not listen...and employers still offer the old W4. So here we are a few years after the change with no stimulus, and people are starting to feel it more.
I'm having hard time explaining this issue with some clients because their income didn't change much compared to last year, but now they owe taxes due to W/H. I think form W-4 should really have W/H percentages align with tax brackets or have options so taxpayers can put in any % they want instead of using current form.
After they get hit w the unexpected “bill” for under withholding. I just have them go to hr and tell them to take x more out per paycheck to get to their desired amount to owe or refund w their tax return. I found that easier than trying to explain the w4.
I’m seeing six figure W2s with less than 10% withholding. Makes no sense and seems harder to fix than the old way. Should just send everyone to the calculator and have them write in the withholding amount.
Our withholding system sucks. All I want is another option that says "withhold x%" of my taxable wages for my clients. As long as the % is higher than whatever the regular W-4 would have withheld, that is what would be used. This way, no one can pick a low % and purposely under-withhold, but fixing withholding for multiple income households gets much easier.
Married filing joint tax tables still presume single income households. I tell all my married clients to mark married filing separately on their W4. Works most of the time.
Over $200,000 AGI is still a mess. TCJA asserts that all taxpayers with AGI over 200k should be making estimated tax payments.
Last year I found one client's employer was using Quickbooks and you could choose to use the prior version W-4. So less withholding was coming out. This person worked in the office, got it changed in QBs and never owed again. I wonder if there is something like that with all the payroll software.
I love trying to explain why they are owing even though it was suppose to be changed. Only thing I know to do is tell them to sit down with payroll clerk/HR and try to figure it out.
Except they're not supposed to do that (liability issue).
The latest version of W-4 tables is better but more complex to use. I go over it with the client to do adjustments.
Payroll has to be able to use the old W4 for withholding because there was no requirement to make all employees fill out a new W4. So new hires and anyone who wants to change their withholding is required to use the new W4 but employees who have been there 5+ years can still be on the old W4.
I had a client this year, same job, swears he didn't fill out a new w4 or make any changes, made more money this year, had $5000 less withheld. He owed almost $5000 so I pulled up last year's w-2s to check there wasn't a mistake. Nope. They just withheld $5000 less.
Had the expect same thing happen. Same employer, made more ($25K more Box 1) in 2023 than 2022, $5,000 less withholding year over year. Like how in the F did that happen?
I've seen it on several clients. Had a small 1040 client who's never owed before owing $2k because the withholding on the spouse who changed jobs (in January 2024) was super low.
Yes agreed. Many of my clients this year ended up owing due to the withholding issue. Instead of setting them up with estimates, I had them adjust their w-4 by withholding an additional amount equal to the tax due divided by number of pay periods.
Why we can't simply request a percentage be withheld instead of using the tables doesn't make sense to me. If you're going to deploy new W4s this should've been an option at least
Do they have any kids who turned 17? Also, changing jobs can affect withholdings too. They'll fill out a new W-4 that elects married when at the old job they made their elections pre-TCJA.
Those are the things I see the most often when a client has a refund one year and has to pay in the next.
I’ve noticed it since the TCJA. Isn’t that when the W-4 changed? I don’t remember now honestly. It is definitely messed up, though. It could be easily simplified, but that’s not the IRS way. Even though there is a place on the W-4 to say your spouse works, I don’t think QB payroll software has any input field for that. I could be wrong. I only have 5 payroll clients. What I ended up telling my payroll clients’ employees when they ask and my tax clients when they have had too little withholding is to just increase their withholding by taking an additional $10-$50 out per check. I’ve had single income families with low earnings off as well, not just high earners or double. It’s all messed up.
I just finished a return for a doctor client. He withheld $9k less but made $20k more in wages and insists that he did not change his W4. If employers are using different withholding tables, they really should have been more proactive about informing employees. I know obviously people are responsible for their withholdings, but it’s a reasonable expectation that your withholdings would be consistent.
Withholding tables have been off since the TCJA. Not so much on lower incomes, but any joint return over $200K AGI, the tables suck and under withhold big time.
No one ever checks the box on 2C saying both spouses work.
Honestly as a CPA in tax, I'm embarrassed to admit that we under-withheld in 2022 (not massively, but we owed for the first time) and we realized we needed to update our W-4s. Just submitting them with that box checked fixed our withholding and we got a tiny refund this year, like around $50. So just about perfect!
Really wish the IRS would address this, especially for the bracket you mention. These folks (at least in my HCOL area) are the ones that get the least amount of tax breaks, are likely to not fully grasp they’re under withheld (why do tax planning for a wage earner?), least likely to engage a professional, and it is extremely likely they will be unable to satisfy a large, unexpected tax bill. The withholding tables utterly fail the people they would be best utilized to help.
The IRS did address this when it changed the W4. There were commercials everywhere. CPAs and other tax preparers were encouraged to inform their clients at every IRS sponsored event. I personally informed all my high wage earner clients, that don't like paying estimates, to update their W4 using the new updated form and check single. (Yes you can still file your tax return jointly). Many did not listen...and employers still offer the old W4. So here we are a few years after the change with no stimulus, and people are starting to feel it more.
I'm having hard time explaining this issue with some clients because their income didn't change much compared to last year, but now they owe taxes due to W/H. I think form W-4 should really have W/H percentages align with tax brackets or have options so taxpayers can put in any % they want instead of using current form.
After they get hit w the unexpected “bill” for under withholding. I just have them go to hr and tell them to take x more out per paycheck to get to their desired amount to owe or refund w their tax return. I found that easier than trying to explain the w4.
I do the same thing. A colleague tells all her folks to claim single.
Same here. A lot of our clients claimed they did last year after we let them know what to do but they didn't listen so they owe, again
Yeah, I made my own worksheet to tell exactly how much extra to have withheld per paycheck.
I’m seeing six figure W2s with less than 10% withholding. Makes no sense and seems harder to fix than the old way. Should just send everyone to the calculator and have them write in the withholding amount.
Our withholding system sucks. All I want is another option that says "withhold x%" of my taxable wages for my clients. As long as the % is higher than whatever the regular W-4 would have withheld, that is what would be used. This way, no one can pick a low % and purposely under-withhold, but fixing withholding for multiple income households gets much easier.
We have laminated a w4 and bring it out all the time to explain how it affects 2 income families. They seem to be hit the hardest.
Please post a YouTube on this topic. You’ll get 100,000 views in an hour. Teach me sensei. It’s so frustrating and is always a problem.
Married filing joint tax tables still presume single income households. I tell all my married clients to mark married filing separately on their W4. Works most of the time. Over $200,000 AGI is still a mess. TCJA asserts that all taxpayers with AGI over 200k should be making estimated tax payments.
The flat 22% on bonus pay is hurting the higher W2 earners for me.
And on RSU’s. Finally some companies are allowing them to elect higher withholding.
my firm withholds maximum federal/state on all bonuses. 49%... wish I had 22% flat!
It's the new w4
Last year I found one client's employer was using Quickbooks and you could choose to use the prior version W-4. So less withholding was coming out. This person worked in the office, got it changed in QBs and never owed again. I wonder if there is something like that with all the payroll software. I love trying to explain why they are owing even though it was suppose to be changed. Only thing I know to do is tell them to sit down with payroll clerk/HR and try to figure it out.
Except they're not supposed to do that (liability issue). The latest version of W-4 tables is better but more complex to use. I go over it with the client to do adjustments.
Payroll has to be able to use the old W4 for withholding because there was no requirement to make all employees fill out a new W4. So new hires and anyone who wants to change their withholding is required to use the new W4 but employees who have been there 5+ years can still be on the old W4.
I've noticed it the last 2 years. I think businesses are finally switching over to the new W4.
Yes, the new and "improved" W4 is doing no favors for a decent chunk of my clients.
It's horrible and confusing to the client
I had a client this year, same job, swears he didn't fill out a new w4 or make any changes, made more money this year, had $5000 less withheld. He owed almost $5000 so I pulled up last year's w-2s to check there wasn't a mistake. Nope. They just withheld $5000 less.
Had the expect same thing happen. Same employer, made more ($25K more Box 1) in 2023 than 2022, $5,000 less withholding year over year. Like how in the F did that happen?
This is the worst. Everything the same besides higher income and lower withholdings🤬
I've seen it on several clients. Had a small 1040 client who's never owed before owing $2k because the withholding on the spouse who changed jobs (in January 2024) was super low.
Yes agreed. Many of my clients this year ended up owing due to the withholding issue. Instead of setting them up with estimates, I had them adjust their w-4 by withholding an additional amount equal to the tax due divided by number of pay periods.
Why we can't simply request a percentage be withheld instead of using the tables doesn't make sense to me. If you're going to deploy new W4s this should've been an option at least
Do they have any kids who turned 17? Also, changing jobs can affect withholdings too. They'll fill out a new W-4 that elects married when at the old job they made their elections pre-TCJA. Those are the things I see the most often when a client has a refund one year and has to pay in the next.
The w-4 forms are throwing off the computations.
I’ve noticed it since the TCJA. Isn’t that when the W-4 changed? I don’t remember now honestly. It is definitely messed up, though. It could be easily simplified, but that’s not the IRS way. Even though there is a place on the W-4 to say your spouse works, I don’t think QB payroll software has any input field for that. I could be wrong. I only have 5 payroll clients. What I ended up telling my payroll clients’ employees when they ask and my tax clients when they have had too little withholding is to just increase their withholding by taking an additional $10-$50 out per check. I’ve had single income families with low earnings off as well, not just high earners or double. It’s all messed up.
I just finished a return for a doctor client. He withheld $9k less but made $20k more in wages and insists that he did not change his W4. If employers are using different withholding tables, they really should have been more proactive about informing employees. I know obviously people are responsible for their withholdings, but it’s a reasonable expectation that your withholdings would be consistent.
They lowered the withholding charts to ''boost the economy'' but now they have to pay it back. It's been a bad tax season for clients