How do I avoid another 25k dollar tax bill?

[DMFA]

PNWskindoc wrote:

Thanks DMFA! Are you on a single income as well?

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No, which means I have to withhold even more than I usually would because my wife earns somewhat highly, too.  We have to file single, no exemptions, add'l $300 or so per paycheck in our 33% bracket to reach our effective withholding rate of 19%.

[The White Coat Investor]

Jarpee wrote:

What do you mean make sure we are in the safe harbor? I am a noob regarding tax strategies. Sorry. Haha.

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https://www.whitecoatinvestor.com/estimated-taxes-and-the-safe-harbor-rule/

I underpaid my federal taxes by over $100K this year, but because I made quarterly estimated tax payments totaling 110% of what I owed last year, I won't have to pay any penalties. I will have to pay the taxes owed of course. There are other safe harbors, but that is the main one.

[PNWskindoc]

Thanks DMFA! Are you on a single income as well?

[DMFA]

When I file taxes, I file jointly.

On form W-4 which you provide to your employer to direct your withholding, I withhold at single rate because it's higher and I need additional withholding to get to the appropriate rate

[The White Coat Investor]

You are almost always better with MFJ but particularly when there is only one income.

[PNWskindoc]

jfoxcpacfp wrote:

PNWskindoc wrote:

Yup, this is my first year out. According to turbotax, I’m due for a refund of ~$5300 from federal and $2500 form state (CA). I made about $120k from my new attending job which was paid on a w2 (I took 4 allowances). I also made about $60k moonlighting which was paid on a w2 (0 allowances) and ~$35k form my residency income (also took 0 allowances). So I’m surprised when you say I may have a 5-figure tax bill when turbotax is saying I’m due for a refund of almost $8k. Am I overlooking something? 

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I’m talking about 2017 being your first full year as an attending and you’re talking about preparing your 2016 return. Last year you had half and half, right? I’m concerned if you take 4 allowances in 2017, you’ll be underpaid. No problem with 2016 – TT is almost certainly correct.

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For those of you who are married but have only one income, are you filing "married but single rate" or still filing "married jointly"? Thanks

[Jarpee]

What do you mean make sure we are in the safe harbor? I am a noob regarding tax strategies. Sorry. Haha.

[PNWskindoc]

jfoxcpacfp wrote:

PNWskindoc wrote:

Yup, this is my first year out. According to turbotax, I’m due for a refund of ~$5300 from federal and $2500 form state (CA). I made about $120k from my new attending job which was paid on a w2 (I took 4 allowances). I also made about $60k moonlighting which was paid on a w2 (0 allowances) and ~$35k form my residency income (also took 0 allowances). So I’m surprised when you say I may have a 5-figure tax bill when turbotax is saying I’m due for a refund of almost $8k. Am I overlooking something? 

Click to expand…

I’m talking about 2017 being your first full year as an attending and you’re talking about preparing your 2016 return. Last year you had half and half, right? I’m concerned if you take 4 allowances in 2017, you’ll be underpaid. No problem with 2016 – TT is almost certainly correct.

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Ah ok. That makes sense. Thanks (as always) for your help!

[childay]

If you're a full-time dermatologist and taking that many exemptions there is no way you are witholding enough for 2017

[jfoxcpacfp]

PNWskindoc wrote:

Yup, this is my first year out. According to turbotax, I’m due for a refund of ~$5300 from federal and $2500 form state (CA). I made about $120k from my new attending job which was paid on a w2 (I took 4 allowances). I also made about $60k moonlighting which was paid on a w2 (0 allowances) and ~$35k form my residency income (also took 0 allowances). So I’m surprised when you say I may have a 5-figure tax bill when turbotax is saying I’m due for a refund of almost $8k. Am I overlooking something?

Click to expand...

I'm talking about 2017 being your first full year as an attending and you're talking about preparing your 2016 return. Last year you had half and half, right? I'm concerned if you take 4 allowances in 2017, you'll be underpaid. No problem with 2016 - TT is almost certainly correct.

[PNWskindoc]

jfoxcpacfp wrote:

PNWskindoc wrote:

So I’m taking 4 allowances for myself, SAHM, and daughter. We just have one income / employer. Should I be adjusting my allowances too?

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You, wife, and daughter = 3 allowances (?) Many factors can affect how many withholdings you claim, but, I wouldn’t be comfortable taking so many allowances, whether 3 or 4. Didn’t I read in another post that this is your first full year out of training? Hate to see you build up a 5-figure tax bill. Use an online calculator or talk to your CPA, should be fairly easy to estimate.

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I'm just following the instructions from the W-4 personal allowance worksheet:

1: for myself

1: I'm married and have just one income (wife stays at home)

1: for my spouse

1: for my daughter

Yup, this is my first year out. According to turbotax, I'm due for a refund of ~$5300 from federal and $2500 form state (CA). I made about $120k from my new attending job which was paid on a w2 (I took 4 allowances). I also made about $60k moonlighting which was paid on a w2 (0 allowances) and ~$35k form my residency income (also took 0 allowances). So I'm surprised when you say I may have a 5-figure tax bill when turbotax is saying I'm due for a refund of almost $8k. Am I overlooking something?

 

[jfoxcpacfp]

PNWskindoc wrote:

So I’m taking 4 allowances for myself, SAHM, and daughter. We just have one income / employer. Should I be adjusting my allowances too?

Click to expand...

You, wife, and daughter = 3 allowances (?) Many factors can affect how many withholdings you claim, but, I wouldn't be comfortable taking so many allowances, whether 3 or 4. Didn't I read in another post that this is your first full year out of training? Hate to see you build up a 5-figure tax bill. Use an online calculator or talk to your CPA, should be fairly easy to estimate.

[DMFA]

PNWskindoc wrote:

So I’m taking 4 allowances for myself, SAHM, and daughter. We just have one income / employer. Should I be adjusting my allowances too?

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Depends on how much you make and how much ends up being withheld.  If you can estimate your deductions for the year, it should be very easy to figure your taxable income and, therefore, your total tax due and the effective percent.  Then you figure out how to get that percentage based on filing status, exemptions, or add'l amount withheld.  The IRS calculator really does work if you know those things, especially if you have only one income.

[PNWskindoc]

So I'm taking 4 allowances for myself, SAHM, and daughter. We just have one income / employer. Should I be adjusting my allowances too?

[childay]

Myself, I withold extra each month with zero exemptions as mentioned above. I don't believe the IRS penalizes you for the first year of underwitholding.  If you don't increase your W4 form you could also make quarterly estimated payments, depending on your income through the year.. I'm not sure if your spouse is working as well?  That makes it a bit more complicated.