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Wife and I have been married for almost 2 years. We filled jointly last year and W4 was at Married but withholding at single rate... we had 0 allowances. We got $1500 back last year and so we decided to change to 1 allowance each this time on our W-4. We got our YTD from our Dec pay check and I plugged in the numbers into the Turbo Tax TaxCaster http://turbotax.intuit.com/tax-tools/calculators/taxcaster/ and it says we will owe $2500?!?

Is this accurate and will it be different than when we get our W-2? I did not factor in student loan interest at all but that was $1000 for her and $1300 for me on interest. So I dont think that would make that much of a difference.

Why would we owe so much if we got $1500 back one year to estimated owing $2500 the next year? I dont think we went up in tax bracket.. if we did go from 25% to 28% would that make the difference? We are saving for a house to buy in the near future and this would really suck if we had to pay $2500.

Please, any input would help.

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Don't the 2300 of the student loan cover almost all the difference? That seems to me to be the answer to your question. $200 more or less because of the allowances is not unheard of. – littleadv Jan 16 '12 at 19:54
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An allowance in 2011 was $3700, so you basically told them to "not tax $7400", in the 25% bracket, this would have reduced your withholding $1850. Or you should owe about $350 instead of getting a refund. There is something you are either not sharing, or forgot to put into the software. – JoeTaxpayer Jan 17 '12 at 0:35
I would wait until you get your actual W-2's before panicking too much. Once you get your actual taxes figured if you still do not understand then try to take them to a tax advisor for your specific circumstances. My guess is you will be able to tell if you put the numbers side by side. – user4127 Jan 17 '12 at 18:55
Everything has been resolved. Not sure what happened, but when I used Turbo Tax 2011 the numbers were totally different. Looks like we will be getting $1600 back and owe State $40. Student loan interest helped. Next year we wont be able to do that since our income is going over $150k. Thanks! I love this forum. – NOVA703 Jan 23 '12 at 15:30

1 Answer

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Four possible reasons for the difference:

  • Taxable Income: Did you use Taxable Income the Turbotax tool? This would be after removing the amount withheld for health insurance and 401K.
  • State Income Tax. If you itemize you can reduce your taxes, but you will have to add as income your state income tax refund from last April.
  • Changes in withholding: Did you change jobs, or get a big bonus? Either Year? This can cause problems in withholding.
  • Education costs: some are credit,s some are deductions. Remember 25% of $2300 is more than $500 of the difference.
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