Federal taxes are not being taken out of my paycheck...

Submitted by AltReality t3_z8aorz in personalfinance

Hi all,

So I realized a few days ago that Federal taxes are no longer being taken out of my paycheck. My HR dept / Payroll processor says that they are following IRS guidelines and that I can send a percentage more of my paycheck to Fed taxes if I want, but I don't think I should have to...I never have before. I claim 2 exemptions. We have a 'sample paycheck' option in our payroll system that shows what our check would be if we tweak our tax setup, and I see that if I set it to 0 exemptions then it does take out a couple hundred for Federal taxes, but at 2 exemptions that drops to 0. Note they are still taking out State taxes (California). So when tax time rolls around, I get the $2K per child (2) for the child tax credit, but a big chunk of that is having to go to pay the missing Federal tax. When I use the IRS tax calculator it shows that I will owe something like $400 next year.

I file Married filing Jointly - my wife doesn't have a job and I have no other jobs.

I am not marked as Exempt in the payroll system.

This all seems to have started when they changed the withholding form a couple of years ago.

Any suggestions? Need any more information to determine what is going on?

Thanks!

0

Comments

You must log in or register to comment.

Mysunsai t1_iyanclx wrote

Exemptions haven’t been a thing for 3 years. How are you filling out the current w4?

5

AltReality OP t1_iyaoi9t wrote

Maried filing jointly 2 children under 17 0 Other Dependents 0 Dependents 0 Other Income 0 Deductions 0 Extra Withholding

Is that what you are referring to or am I missing information?

1

Its-a-write-off t1_iyap8qz wrote

You are utilizing the 4k of child tax credit to pay your federal income tax. So the whole point of the way you filled out your w4 is to factor in the child tax credit already. You seem to think that's a defect, it's not. It's the intent.

5

AltReality OP t1_iyb4075 wrote

I was used to getting a fat refund at the start of the year. I know people say don't give the govt an interest free loan for the year...but I really liked getting $3-4K back...that was how I paid for vacations and stuff. Now I have to figure out another way to do it.

−1

Concerned-23 t1_iyb8yrj wrote

The refund was a free loan you gave the government. You’re getting the same money at the end of the year whether it’s a refund when you file taxes or if it’s just accurate tax withholdings during the year. Technically you have more money when you have accurate tax withholdings and no refund. Adjust your budget to have a vacation savings fund

3

Its-a-write-off t1_iyb51la wrote

There is a line for that. On the w4, you can set an exact dollar amount of extra withholding. This is a per check amount. So if you are paid 24 times a year, to get a 4k refund put 166 extra withholding per check.

2

wowsocool4u t1_iycjbm5 wrote

All that was doing was serving as a savings account. You were overwithholding (i.e. you got smaller paychecks) and then the government gave you the money back at the end of the year. Just start putting a few hundred dollars in a savings account each month.

1

rnelsonee t1_iyapihr wrote

If you tell us your taxable income on your paycheck (sometimes "FIT taxable" or something) we can tell you how much you should have withheld. If you put your gross income in the IRS calculator and it said $400, it's very possible you have >$400 in deductions so your tax will be $0.

Well, let me just do this: for joint filers with 2 children under 17, a $62,700 income for 2022 results in $5 in tax. So if you make <$62,600/yr or so, your withholding should be $0. At $66,000/yr, federal tax liability is $401.

4

Werewolfdad t1_iyaoxv6 wrote

Owing $400 is about perfect. What is your income?

Do you get paid the same every week?

Do you have health insurance or 401k contributions taken out?

1

AltReality OP t1_iyap4qx wrote

$63,060 Salary

no 401k contributions but yes Health Insurance is taken out every check

and I get paid the same every check

1

Werewolfdad t1_iyapl5p wrote

> Health Insurance is taken out every check

How much? And how often are you paid?

Any other pension or other pretax deductions?

1

AltReality OP t1_iyaqh91 wrote

Medical 3 is $231

Medical Memo 3 is $549

I have no idea what the difference is.

No other pension or deductions.

2

Werewolfdad t1_iyaszwh wrote

Yeah then per /u/rnelsonee ’s math, you have no tax liability (and may actually have a negative federal tax rate)

Zero withholding is appropriate

2

rnelsonee t1_iyaqg2e wrote

Yeah, so with medical, it's going to go to $0.

The math if you had no pretax deductions:

You make $63,060. Subtract $25,900 for the standard deduction and your taxable income is $37,160. You pay 10% on the first $20,550 ($2,055), 12% on the rest, $16,610 ($1,993) for a total of $4,048. Subtract $4,000 to Child Tax Credits. Divide $48 by 52 to get $0.92 withheld per paycheck.

1

1955photo t1_iyaoo2k wrote

So take $400 and divide by the number of paychecks, and have that much extra taken out of each check.

2

AltReality OP t1_iyaox9w wrote

I can do that...and probably will wind up doing that...but I am more trying to understand why I no longer have taxes being taken out of my paycheck, rather than what I would consider to be a band-aid solution. I appreciate the comment though.

1

Its-a-write-off t1_iyaw7lu wrote

From the income info you gave, there is no need to do this. You are 0 federal income tax liability, so you don't need to withhold anything.

1

1955photo t1_iyaxzig wrote

From the info your employer has on file, you have zero Federal tax liability.

How much do you make? And do you have significant pre-tax deductions, like 401k or medical insurance?

You have FOUR standard deductions. Not 2.

1

LloydsMary_94 t1_iyb9s5o wrote

I suck at taxes and understanding all this stuff. BUT last year our accountant made it clear I was not having enough federal taxes being deducted. She explained she was seeing it a lot since some changes in payroll taxes were made - I think. Anyhow, I found a chart online that you can go through to see how much you should be paying and am going off that. We shall see how tax season goes this year!

2

dcdave3605 t1_iybhbyx wrote

You don't have a tax liability with the feds. Just direct deposit money to an account for the amount of taxes you were paying if you can't budget elsewhere.

1