Both my wife & I are regular W2 employees, but for the past at least 5 years her allocations have been off such that she ends up underpaying federal by a large margin and we end up owning around $6k when we file our taxes. Every prior year, I've filed our taxes and had them accepted without any further issue.
This year, I got a bill for a penalty for underpayment. When I look up the safe harbor options, I likely don't fit any of them, but it seems weird that I didn't get hit with this penalty in any of the prior years when I filed the same way, owed around the same amount, and our income has been around the same (with modest increases year over year).
Does anyone know if this is an area that the IRS is being stricter about this year?
I've regularly owed on my taxes, but for the first time this year I got a penalty
byu/beardiac intax
Posted by beardiac
6 Comments
Maybe you met the withholding thresholds for every year before. I do know that the IRS seems to be assessing more penalties than before
Perhaps your income was increasing? So even though you owed in, your withholding was more than your previous year tax liability?
Bottom my knowledge – but easy way to fix your problem is to fill out the IRS W4 estimator
No they are not stricter
In the past, you must have met safe harbor requirements so there was no underpayment penalty assessed.
To meet the safe harbor requirement and avoid underpayment penalty your withholding or prepayments need to cover 90% of tax liability, or be equal to 100% of the previous years tax liability (110% if over 150k AGI), or you owe less than $1000.
If your modest increases resulted in a combined income that is now over $150,000 in 2024, that would explain it. The required annual payment goes up by 10% at that threshold.