WTF I just did taxes, I owe government 8 grand, and got assessed underpay penalty

As a self employed individual, you are required to pay federal incomes taxes, Social Security, and Medicare taxes on your own, typically through quarterly estimated tax payments. Employees are required to have sufficient money withheld and sent to the IRS to cover their taxes. Taxes must be paid on income as you earn it. If you do not pay enough tax throughout the year, you could be assessed penalties. Taxes are essentially due January 1 through December 31 of 2018. A tax return is required to be filed by April 15 which determines the precise amount of tax for the prior year. That is not the real deadline to pay because you are required to pay as you earn.

dfa wrote:

Wtf, my company apparently didn't withhold enough taxes throughout the year, and just got slapped with a $99 fee.

That aside, the tax code in this country is a sh*t show.

22% effective tax rate. How you guys fairing?

I got $8000 back from Federal and State combined off of a modest income this year. I made strong capital gains off one mutual fund I have that is not qualified and I made about $600 in interest off funds that are earning 2.25% right now.

-39.6 % federal tax rate. Not joking. It comes straight from Turbo Tax. How is NEGATIVE possible? My AGI was very low due to deductions from rental property and then the government owed me TWO tax credits. So those two credits were ~40% of my AGI.

My paycheck had about 18.9 % withheld the whole year though (I live in MI). I find that if you are receiving more than 80% of your GROSS PAY that you are doing something that will bite you later (in MI at least). This year, I changed nothing and the new TAX CODE withholds 18.2 % for the same situation.

Even though I benefit from it, I agree with you that the tax code is miserable, and poorly conceived. Why should smart people need to pay someone $1000 to prepare their taxes when they should be no more difficult than a simple math problem? I do my taxes myself, but even I pay $125 for tax prep software and I talk to so many friends that pay between $250 and $1200 to prepare what should be a medium complexity return.

I realize that there will never be enough political will to reform it, not in my lifetime. They have been talking about overhauling health insurance for 20 years and we have only gotten one plan through in all that time and it is almost universally despised (and that is from someone who buys their OWN health insurance through healthcare.GOV).

Did my taxes Sunday. 4 more years of Trump please!

tax amateur wrote:

There's no such thing as "filing" quarterly, you must be thinking of quarterly estimated payments. But he's already making payments with every paycheck, they're just not withholding enough. $99 on an $8,000 underpayment doesn't sound too bad. BTW, if have withholding taken from your paycheck and you happen to realize before January 1st that you're going to owe a lot, you can have a larger payment taken out of your last paycheck and avoid the penalty.

You can thank Trump for this mess, he pressured the IRS to quickly update their withholding tables after the tax cut so that everyone would immediately see a big, beautiful bump in their paycheck. But the changes were too optimistic and now lots of taxpayers are getting a large bill, especially if you live in a blue state.

This is true. If you "underpaid" by $8000 over the course of the year the average amount you kept (in theory) was $4000. I have an account that has been earning 2.25% for the last year. $4000 X 2.25% = $90.

I still don't think they should charge a penalty. They don't pay you a bonus when you "loan" them $8000 for the year. But if they did not levy that penalty, everyone would put a "0" on their W-4 and deal with it at the end of the year. The government would be broke the whole year.

Owe >20K here. The pain is real.

How many people do you know that pay at tax time? Almost nobody. So eliminating the penalty wouldn't change the fact that people are dumb and they think receiving a refund is a god thing.

Wake up guy wrote:

How many people do you know that pay at tax time? Almost nobody. So eliminating the penalty wouldn't change the fact that people are dumb and they think receiving a refund is a god thing.

Eliminating the penalty would mean that the disciplined among us, and those who don't live paycheck to paycheck, would make it so nothing is withheld from their check. At this time of year, you would then owe whatever you owe.

But over the course of the year, the government would have no money.

People tell me all the time that "You know you are giving the government a NO-INTEREST loan?" I get about $4000 withheld for FEDERAL, so if NONE of that was withheld, I would have $2000 average over the year. Right now I have ALLY DEMAND NOTES earning 2.25%. So I would have $45 in interest that I don't have now.

I never am broke and have $125,000 in my IMMA right now, so having that little bit NOT withheld would change nothing for me. I enjoy getting an $8000-10,000 check around February every year. I put $6500 (over 6 months) in a ROTH IRA and put the rest into a mutual fund.

Because of the HOMESTEAD Property Tax Relief act I would get $1500 back as well as about $2000 in tax credits if I had ZERO withheld from my check.

Your situation (and most of America's) is not like mine. You don't have $125,000 liquid, and you prob aren't putting $6500 in a ROTH, your house is prob not paid off, and you are probably not looking at a $3500 refund if you withhold NOTHING and $9000 if you claim the real amount of exemptions.

You may be doing better than me, you probably are, but that does not mean that it is universally best to withhold NOTHING in order to earn $45 in interest over one year.

dfa wrote:

doctorj wrote:

It is your responsibility to make sure you are withheld the appropriate amount of taxes. You can always check it and aks to be withheld more.

Enjoy your Trump tax cut!

For context, this happened at one of the FAANGs. Thought they could figure out how to crunch numbers

Maybe they should anticipate people having this problem and reach out to you, but they can't change your W4.

I once started a job in October after finishing school and set my withholdings super low for the rest of that year. Was reminded by HR to change them in Jan.

Let’s summarize. 85% people received a Trump tax cut. 85% of the population normally receives a refund. That number appears to be about 70% now due to the changes in withholding and people not making adjustment. So of those additional people who have to pay, most received more money during the year essentially an interest free loan from the Government. Unemployment is down which increases tax revenues even though individuals pay less.

It was a fake tax cut. I paid about 1500 more this year than last. Only the richy rich benefitted

not due yet wrote:

Broken system wrote:

I never knew you could get a penalty for underpayment. I just assumed if you paid the whole thing off at the end of the year you were good to go.

Agreed. This is a really dumb idea. Taxes are due on 4/15. How can you be guilty of underpaying before the money is even due?

This is not the law.

You sound like a typical selfish democrat who wants everyone else to pay for everything. But you don’t want to pay for the poor. 85% received a tax cut. That should make you very happy but no, you are unhappy because you are in the 15% who will pay more so that people with more children get a tax cut or people without an expensive house get a tax cut. Generally, the people who will pay more are high income earners who have a nice mortgage that the increased standard deduction wiped out to equalize them with their poorer neighbors who rent or have a low end house.

Did you still get a refund? How much was you total tax bill?

The ghost of Pat Davey wrote:

The government would be broke the whole year.

Would be broke? More like is be broke. The government already runs in the red continuously.

A lot of people getting on the OP's case about not completing a proper W4.

He's now pointed out that he had a restricted stock gain where the company calculates the tax withholdings and that is not based on is W4.

His company is not going to know about any other household income for him or what his deductions will be.

Really, the withholding should be at the top marginal rate, similar to the default for bonus payouts.

Sure the amount he owes is money he has in advance but the penalty is unfair if his company did not withhold enough on his RSU.

And another comment on the W4s.

Your exemptions should not really change year to year unless something really changes in your life like adding a dependent or losing one when they come of age or you divorce.

So, the new tax rates should not give cause to change your W4s if the tables shifted with equity among taxpayers.

But the tax changes did not affect people equally and that's the main issue with this year's tax season complaints.

The IRS issued a change to the withholding tables early in 2018 that companies began using.

https://www.irs.gov/newsroom/irs-statements-withholding-for-2018

This means that tax code changes were already in 2018 withholding. So you are not likely to see a refund of the difference for your 2017 taxes. It is also likely that the new withholding table was not accurate for all scenarios given the deduction changes.

I lived in a different country for a few years. There taxes are something totally different, and you have to pay a lot less money every month

This is a relatively standard practice, which is a tax system that collects money from taxpayers. This system is necessary for the state and businesses engaged in mortgages, for example, or loans. For some, this is convenient, of course, but someone needs the help of specialists in this because in this business you need to take into account many factors that are the main ones. For this case, there are special services that I personally use, as this has an excellent effect on the result and efficiency. https://anthemtaxservices.com/what-is-tax-debt-relief

There are loopholes to not get screwed by the con artist govt but there's also a few loopholes to take advantage of. The ones getting screwed are screwed HARD though, I feel for any of these people. That's how these con artists make their money, screwing a small number of people hard because they know their complaints will fall on deaf ears so they get away with the robbery/scam.