Inspired by a friend telling me earlier that they fear they will owe this year, I pulled up my most recent paystub and did some quick math to get an idea of what I'm looking at.
Shortened version – I think my employer has been (significantly) under-withholding on the Federal side. To date, my taxable income is 375.7k, federal taxes withheld 74.9k. I'm single, one job, looking at about 2500 in student loan interest deductions, 26k in mortgage interest deductions, 3500 in SALT deductions, and I think that's about it. My quick math is showing I'm going to owe about 15k.
First question is does my math look about right; second question is, how big of a problem is this and is there anything I can/should do now (in 2025) to alleviate any pain come April?
Thank you!
Employer under-withholding federal tax – what to do?
byu/caphis intax
Posted by caphis
5 Comments
Yes, it looks like you have underpaid on federal income tax so far. This is most likely something you need to fix with your w4, not a mistake of your employer.
Do you get commissions, bonus pay, pay from multiple employers, RSU or non cash compensation?
the employer is only doing it wrong if they don’t follow the W4 you filled out, signed and submitted to them. otherwise it is on you.
You “may” be able to reduce a potential 2025 under-withholding penalty by temporarily increasing you withholding from remaining 2025 paychecks. Depends on whether you can afford a huge withholding and whether your employer can respond in time. Just don’t forget to restore it to previous levels starting in January.
After the dust settles when you prepare your 2025 return you can reassess your situation and adjust withholding to come out closer next year.
for this year. but don’t forget your 2026 estimates will have to be 110% of your 2025 tax bill.
My employer underwithheld for a couple of years and the surprise balance felt worse than the actual number. I had Anthem Tax Services walk me through how people usually handle paychecks and adjustments after that going forward.