I got married last year, and made some reasonable estimates of what my taxes would look like in 2012, the first full year of being married.

However, a few things have changed and some of the deductions I had last year, I don't get this year. So, I claimed one more exemption (maybe two) than I should have on my W-4.

As of mid-December, that's enough that my wife and I seem to have underwithheld our taxes by about $2500.

Unfortunately, we don't qualify for the safe harbor - we've paid less than 90% of what we owe (around $19000), and less than 100% of what we owed last year.

We're not self-employed, and don't have any meaningful income outside of our jobs. The deficiency is caused entirely by my extra exemption.

To avoid the penalty, can we still just send the IRS a 1040-ES and a check for about $2000 or so? The calculations behind it seem to be for small business people, but the actual form you send in just seems to be an SSN and a check.

This is in the United States.

  • 1
    An exemption is $3800 of income you are telling them to not tax. In the 25% bracket, that last $3800 is $950 in federal tax not taken. You're close to 3 exemptions away from even. (Note - this is back of envelop math, do the math of the W4 or see circular E www.irs.gov/pub/irs-pdf/p15.pdf for better accuracy. – JTP - Apologise to Monica Dec 7 '12 at 19:48
  • @JoeTaxpayer When the incomes of married people filing jointly are disparate, Circular E does not do as good a job of estimating the appropriate tax withholding. Often, the Married but withhold as if a single person box needs to be checked to have the proper amounts withheld. That is, the OP may well have claimed only an extra exemption and the rest of the underpayment could be due to having chosen to have tax withheld at the MFJ rate. – Dilip Sarwate Dec 8 '12 at 4:07
  • @DilipSarwate - good points. I was viewing Circular E as a tool to know what one's withholding would be based on income and number of exemptions. One should be able, with a current copy of tax software, to calculate their annual tax bill, divide by 26 and see the number of withholding that gets close to that target number. You are absolutely right regarding the 'withhold as single,' but I prefer to withhold as MFJ and specify the additions amount to withhold each period to get it closer to my target. – JTP - Apologise to Monica Dec 8 '12 at 4:34
  • @DilipSarwate, that's right, my wife and I do have a pretty substantial income disparity; that seems to have caused this mess. – Shawaron Dec 8 '12 at 5:09
  • 1
    All the issues regarding deductions, and brackets would have also applied for 2011. – mhoran_psprep Dec 8 '12 at 16:18

Yes, you can send in a 2012 1040-ES form with a check to cover your tax liability. However, you will likely have to pay penalties for not paying tax in timely fashion as well as interest on the late payment. You can have the IRS figure the penalty and bill you for it, or you can complete Form 2210 (on which these matters are figured out) yourself and file it with your Form 1040. The long version of Form 2210 often results in the smallest extra amount due but is considerably more time-consuming to complete correctly.

Alternatively, if you or your wife have one or more paychecks coming before the end of 2012, it might be possible to file a new W-4 form with the HR Department with a request to withhold additional amounts as Federal income tax. I say might because if the last paycheck of the year will be issued in just a few days' time, it might already have been sent for processing, and HR might tell you it is too late. But, depending on the take-home pay, it might be possible to have the entire $2000 withheld as additional income tax instead of sending in a 1040-ES.

The advantage of doing it through withholding is that you are allowed to treat the entire withholding for 2012 as satisfying the timely filing requirements. So, no penalty for late payment even though you had a much bigger chunk withheld in December, and no interest due either. If you do use this approach, remember that Form W-4 applies until it is replaced with another, and so HR will continue to withhold the extra amount on your January paychecks as well. So, file a new W-4 in January to get back to normal withholding. (Fix the extra exemption too so the problem does not recur in 2013).

  • +1 for w4 adjustment, there still might be time to fix it. – littleadv Dec 7 '12 at 18:37

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