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I’m freaked out. Me and my spouse put our W2 numbers into TurboTax and it says we owe $50k more taxes. Our W4s have zero allowances. Why do we still owe so much?! Is it reasonable to hire a tax consultant to help? We do not have any weird dividends, don’t have funds nor play at stock market, don’t have second income. At this point I am so freaked out that I am thinking to quit my job because if we pay what TurboTax says us to pay there is no point for me to work.
No kidding. Hire a CPA
Don’t know the details but I suspect you got double taxed somewhere. If you can’t figure it out try ask or workmate or an accountant
Is your gross income above 400k?
Most likely you made a bundle on stock vesting. Whenever your stock vests, the fair market value is computed and included as part of your compensation on your W2 - since it is of course income. However, they usually only sell enough to cover 25% tax rate, which is the minimum required by law. Since you are clearly a high earner, you owe at a higher tax rate than 25%, and you owe the difference. You should be estimating taxes and paying quarterly to avoid this. Solution - sell some of the stock that vested to cover the actual taxes.
We got a lot of stock vested, yes :-/
The flat rate is 22% now. Thanks Trump.
Hire a damn CPA
Be sure your stock vesting/selling events are being correctly reported. This happened to me once and the reason was because the form from Morgan Stanley was misreporting the stock values at 0. In this case, the entire stock value was being reported as profit and I would have to pay taxes on it.
It shouldn't come as a surprise. Probably you got RSUs and the 50k is the difference between the mandatory 22% withholding and your actual tax bracket. You may have to pay penalties as well on top of the 50k depending on your tax situation.
Shit :-( But how to avoid this penalty? Pay quarterly?
What I did is that I calculated the above difference, divided it by the number of paychecks (per year) and set (i.e. told payroll team) that amount as additional amount to be withheld from my paychecks.
Hire a good cpa. If you need one I can provide with a contact. He can surely help reduce it.... good luck
It’s not because you work. Tax is progressive and it’s always strictly better to have 2 salaries compared to one. But given that you don’t know about that, i honestly advise getting CPA to explain to you how taxation works. And for this specific situation, due to the law, you were underpaying taxes, so view that as a loan you got for from Uncle Sam, that you need to pay back now. Read how stock vesting is taxed. For anyone making significant amount of money from stocks you WILL underpay taxes, and owe it unless you withheld more form your normal paychecks or do quarterly payments.
I know that having 2 incomes is better than 1, no need to be an ass here. I also get benefits, 401k etc while working. But if we pay additional 50k taxes that will make me work at almost minimal wage in the end (if we take in account commute, work clothing, lunches etc). That’s when I start questioning my work. We definitely will hire CPA to help with this stock vesting process.
I’m not being an ass, just honestly saying that I don’t think you really understand how taxes work, and it’ll be much better for you to educate. Extra $50k in taxes is not connected with you getting salary. Do simulation in turbo tax, exclude your salary and see it for yourself - you’ll still have big tax liability.
You own vs you owe::: its a big difference dude
Ops, fixed. I’m just totally out of my mind now...
OP, calm down and reflect on your income. If you owe 50K in Federal income tax then you must make a ton of money or if it's property tax then you own some killer land. It may be a headache but this should be no issue to pay. Sell some stock, pay your taxes, and the relax with a nice cold Brew.