Your Life

Your Life

Major life milestones often have a major tax impact. Changes in your marital status, having a baby or adopting a child can have significant impact on your taxes. This is the place to ask questions about dependents, real estate, and other various scenarios that play a significant role in what taxes you pay.

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Pioneer
Posts: 1
Registered: ‎01-18-2016

Wrong tax bracket?

I am attempting to file my taxes for the 2nd time after getting married in 2016. When we filed our taxes last year, for 2016 year, we got a refund and everything was fine.

 

Nothing changed, we both only took 1 allowance, but now when filing my taxes we are being told we owe ~$2,200. We both received small raises but our total taxable income is still in the same tax bracket as last time (<$75,900). I'm annoyed that we are being penalized for more money than we even got raises for despite not jumping to a new tax bracket.

 

Any ideas on how I can fix this? Thanks.

Associate (Neighbor)
Posts: 358
Registered: ‎04-03-2013

Re: Wrong tax bracket?

Hello, I'm sorry you got some bad news this year but let me see if I can help going forward.

 

Withholding for taxes can be tricky with 2 working spouses mainly because of the W4 process. Each spouse's employer can not factor in the other's income, so withholding rates are applied solely to the income that earned by the individual. For example, company A where 40,000 was earned will only look at that 40,000 and not the 35,000 at company B.

 

You said you only took one allowance, but if the filing status was Married Filing Jointly that will withhold taxes at a lower rate. So a status of married 1 might of been very accurate if not for a second income. I would generally suggest that on one of the jobs, changing the withholding rate to single 0. Remember that the W4 withholding is not a tax filing and it does not have to be what you will file your taxes as.  Your situation this year might of occurred if you changed withholding status to married in 2016/2017 and withholding for part of the year was still done at the higher single rate.

 

I hope this is some helpful guidance. It is possible to work out in more detail what your withholding needs to look like. I would recommend the tax calculator on H & R Block's website as a starting point.

 

Regards,

Caleb