Back in 2014 and 2015, I had W-4 on file with my employer where I claimed only one exemption (myself).
However, I always ended up owing federal tax and getting CA state refund. Last year I also ended up incurring capital loss, but still the same situation - CA state tax is overpaid, but federal tax is underpaid.
Also, today I found out from one of my coworkers that he has the same issue and this year he ended up paying penalty for underestimating his federal taxes.
Is this a bug in ADP? Are they supposed to withhold the right amount of taxes, if my only income is from my Employer? Would they swallow underestimated tax penalty, if I filed W4 correctly, but they withheld less?
- I am single and don't have any dependents.
- No one else can claim me as dependent.
- Besides base salary I also receive employer stock (ESPP, RSU, NSO). However, employer withholds taxes for these stock transactions through my broker (I see them broken down on my W2). Also, I do "same day sale" so there is no capital gain.
- I have been subject to Alternative Minimum Tax.
- This year I have also instructed my employer to withhold extra federal income tax and also updated my W4 to have 0 exemptions.
Update: I am not blaming ADP for anything right now because I don't have to pay penalty.