CPA says I owe federal taxes; payroll says they withheld everything correctly. I don’t know where to go from here.

Submitted by contessamiau t3_126u9q0 in personalfinance

In 2022 I got both a raise and a bonus. No other income other than from my employment.

While doing my taxes, CPA is telling me that I owe several grand in fed taxes and that payroll withheld too little fed tax but sufficient state tax. When I contacted payroll they say they did everything correctly.

CPA says that if he goes through each of my paychecks to see what went down where that would cost me a lot of money for his time.

I am ok paying what I owe but i’d like to understand what happened. How can I make light over this without paying my CPA a lot to look at each individual paycheck?

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m3003 t1_jeauwjd wrote

Do you have other income that's not having taxes withheld like stock sales?

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BBG1308 t1_jeauwwj wrote

>CPA says I owe federal taxes; payroll says they withheld everything correctly

It's possible for both of these things to be true.

Your employer only knows how much they are paying you. They don't know about the rest of 900 possible things that could change your tax bill such as capital gains, interest, rental income, etc.

ETA: I see you've added that you have no other sources of income. You can look at the IRS tax withholding tables yourself and compare what your employer is deducting to the tax tables. No need to pay an accountant to do that.

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WingedBeagle t1_jeav5ac wrote

You don’t have your withholding set to “Married”, do you?

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Default87 t1_jeav5k3 wrote

Your payroll only withholds based on how your W4 is filled out. So yes, they likely withheld correctly per your W4, but your w4 was not set up correctly.

Fix your W4 so you don’t have the same issue next year.

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shadracko t1_jeav80x wrote

Withholding is an estimate. It's never perfectly right, and there's nothing wrong with owing a bit at the end of the year. You can adjust your W4 so that more is withheld for 2023 if you wish. There's no point in going through each paycheck. Aggregate withholding is all that matters.

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RMN1999_V2 t1_jeav9ye wrote

Payroll did everything right does not mean you don't owe taxes. It simply means they withheld in accordance with the withholding allowances you claimed.

Bonuses can be messy for federal taxes. If you bonus is more than about 20% of your income, I would strongly suggest you build a spreadsheet to predict your tax liability and pay quarterlies if needed in the future.

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t-poke t1_jeavecr wrote

They're both right.

Payroll withholds according to the instructions you provide them in your W4 form. They did everything correctly according to what they were told. If they have incorrect instructions from you, then it would result in not withholding enough and owing in April. But they don't know your financial situation, hence the reason the W4 form exists.

File a new W4 form with your employer, and make sure the instructions are correctly followed.

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Jmb3930 t1_jeavjc0 wrote

Employer would take taxes out depending on how your W4 was filled out and the amount of wages.

Even if the employer didn't take the correct amount there is nothing to be done about it now. You are responsible for your taxes whether thru payroll or paying now.

So IMO paying CPA to go thru paycheck will not help.

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AppState1981 t1_jeavwxz wrote

You filled out the W4 and they entered it just like you requested. They can't figure out how you want it done

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Caldos4 t1_jeawwby wrote

I'm not sure what you would gain by having a CPA go through your pay checks at $300 or $400/hr (or whatever they charge).

For some unknown reason, your employer under-withheld taxes. Your best recourse would be to work out a payment plan with the IRS and have your employer withhold additional money each paycheck. It sucks but a lot of us have been there.

I'm sure it has something to do with your bonus and pay raise if you didn't have the same problem last year. There are a lot of posts on this sub about the exact opposite problem, where their employer withheld taxes at too high of a rate after overt time or for a bonus. It's why so many people believe they're losing money by working OT or getting a Christmas bonus.

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WingedBeagle t1_jeawzeh wrote

Replying to contessamiau (#2,493,902)

If you have the option for “Married, but withhold at a higher Single rate”, that is what you want to go with unless your wife is Stay at Home. Withholding as Married is not accurate if your spouse has a job too.

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Rave-Unicorn-Votive t1_jeax0aq wrote

>In 2022 I got both a raise and a bonus.

If your bonus was a significant percentage of your total comp and your tax bracket is ≥24% that scenario will almost always be under withheld and you have to actively engage mid year to compensate if you don't want to true up in April.

>How can I make light over this without paying my CPA a lot to look at each individual paycheck?

Look at your paychecks yourself, ask a question here when you come across as inconsistency that you don't understand.

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CenoteSwimmer t1_jeaxodu wrote

If this happened to me, my lazy ass would do this: file a new W-4, and in line 4C for “extra amount to withhold”, put in x/number of pay periods, where X is the amount extra you owed this year. So, if you owed $2,600 extra now, and get paid every 2 weeks, 2600/26= withhold $100/pay period extra.

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contessamiau OP t1_jeaymcf wrote

Replying to WingedBeagle (#2,494,005)

Thanks! I’m going down this rabbit hole to learn about it now.

But I wanted to ask, is this information supposed to be common knowledge/intuitive to a native who was born here? Or is this something you are supposed to learn only if you run into trouble?

I am mad at myself for not knowing that just because I am married and filing together doesn’t mean I should choose this option on the W4. I don’t know why I didn’t know that and what should I do to stop making such mistakes.

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nothlit t1_jeazotk wrote

Replying to contessamiau (#2,494,390)

It's perfectly fine to choose "Married Filing Jointly" on the W-4, but if your spouse also works, then you have to follow the instructions in Step 2: "Complete this step if you (1) hold more than one job at a time, or (2) are married filing jointly and your spouse also works. The correct amount of withholding depends on income earned from all of these jobs."

The problem is a lot of employers use an online payroll system that offers a barebones web form to fill out in place of the actual W-4, and don't bother pointing you to the real form for instructional purposes.

Here's the full form with instructions: https://www.irs.gov/pub/irs-pdf/fw4.pdf

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sephiroth3650 t1_jeazwrt wrote

Payroll just withholds according to the W4 that you submit to them. If that W4 isn't set to withhold enough, then you won't have enough withheld. So payroll is likely correct in telling you they did everything right. And your CPA is likely also correct....you didn't have enough withheld, so you owe.

That being said, I really don't know why your CPA will need to go through each of your paychecks. All they need to know is your final income numbers, and how much in total was withheld.

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lovemoonsaults t1_jeb2wyy wrote

The CPA can't do anything for you after the fact. Why would they go through each paycheck? Your CPA is trying to get you to go away with the "I can do this, for a lot of money." Nah. Just have them tell you how to fill our your W4 for far less effort.

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d_rek t1_jeb356d wrote

You need to amend your w4 withholding. Use the IRS form. It’s fairly easy to follow just go down the steps and consult the table. Adjust extra withholding amount if you want to pad your withholdings.

Also what was the nature of the bonus? Was it reporting on your w2? If not that might be the culprit for owing taxes if you didn’t pay on the bonus.

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poodog13 t1_jeb5uc6 wrote

Congrats, you got an interest free loan from the government. Pay it back and move on.

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contessamiau OP t1_jeb77ki wrote

Replying to poodog13 (#2,496,185)

Thanks for helping me see this in a positive way. I think the feeling of loss at having to cut a fat check is what’s brining me down, aside from feeling stupid. But yay! An interest-free loan!

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richardelmore t1_jeb88h1 wrote

Replying to contessamiau (#2,494,390)

Whether I owe or get a refund seems to change from year to year based on things I can't really predict at the start of the year (bonus, capital gains, etc.).

I gave up on trying to get my withholding right and now I just transfer a hundred bucks from each paycheck into savings. If I have to pay taxes when the time comes the money is there, if not I can take the money I accumulated and use it for something else.

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CookieAdventure t1_jecf88v wrote

Note: Turns out OP is married and spouse earns income but this wasn’t reflected in their W4s.

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contessamiau OP t1_jecmtrb wrote

Replying to CookieAdventure (#2,507,218)

I am glad someone pointed out that this needed to be reflected.

“Married filing jointly” to me intuitively implies that I am married and the person I’m filing with also has taxes to file. If i were the only one working, then I’d be “head of household”, right?

We’ve been filing married filing jointly for years and this is the first year when we owe back taxes.

So I’m still confused.

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