That's really helpful - I didn't realize the W-4 had changed that much! I haven't actually updated my W-4 in about 3 years, so that could definitely be part of the problem. Is there a specific line or section on the new form I should pay attention to for my situation?

The most important part for your situation is Step 2 of the new W-4 form. It gives you three options for handling multiple jobs: (a) using their online calculator for most accuracy, (b) using the Multiple Jobs Worksheet on page 3 of the form, or (c) a simplified method if you have only two jobs with similar pay. Since you have three jobs with different pay levels, option (a) using the Tax Withholding Estimator on the IRS website would be your best bet. It's more detailed than the worksheet and will account for your specific situation. The calculator will tell you exactly what to put on line 4(c) of your W-4 for additional withholding. Just make sure you have recent pay stubs from all three jobs when you use it.

The multiple jobs worksheet still exists but it's been revised. It's now part of Step 2 on the new W-4 form. It's actually more comprehensive than the old version but a bit more complicated to fill out. I found the online withholding calculator easier to use than the paper worksheet since it does all the calculations for you.

Thank you so much for the exact citations! This is exactly what I was looking for. One follow-up question: when calculating the 25% employer contribution limit, do I need to reduce my Schedule C net profit by the amount of any employee contributions I make first? Or is it 25% of the total net profit?

Great question. You calculate the 25% employer contribution limit based on your net self-employment income AFTER deducting your employee deferral contributions. So the calculation order is: 1) Start with Schedule C net profit, 2) Subtract half of self-employment tax, 3) Subtract your employee deferral contribution, 4) Calculate 25% of this resulting amount for your maximum employer contribution. This ensures you're not "double-dipping" on the employee contribution portion. This is outlined in IRS Publication 560, but it's definitely one of the more confusing aspects of solo 401k planning. The employer contribution is effectively limited to around 20% of your original Schedule C net profit when you factor in all these adjustments.

That's interesting advice about having one 401k plan for multiple businesses. Do you need to file anything special with the IRS to indicate that the plan covers multiple sole proprietorships? Or do you just need to make sure the plan documents are set up that way with the provider?

Is it too late to do anything about it for this year's taxes? Or am I just stuck with the lower refund?

For this year's taxes, you're unfortunately stuck with the current situation. The withholding already happened in 2024, and you can't retroactively change it. However, you can absolutely prevent this from happening again. Fill out a new W-4 for both jobs right away, making sure to check the multiple jobs box or complete the multiple jobs worksheet. This will ensure the proper amount is withheld going forward and you won't have another surprise next tax season.

FreeTaxUSA is way better at explaining these things. It has a detailed summary page that breaks down exactly how each form affects your overall tax situation. And it's way cheaper than TurboTax for basically the same service.

Whoa I had no idea about the "recapture" thing! What exactly does that mean? Would we have to pay back all the tax savings from the depreciation when we sell the house?

You don't exactly "pay back" the tax savings, but the amount you depreciated gets taxed when you sell. For example, if you depreciated $20,000 of your home office over the years, that $20,000 would be subject to depreciation recapture tax (typically at 25%) when you sell, even if the rest of your home sale qualifies for the capital gains exclusion. So you'd pay around $5,000 in recapture tax on that $20,000 of depreciation. The benefit is that you got tax deductions spread over many years, which usually outweighs this future tax. This is why proper record-keeping is crucial - you need to track all the depreciation you claim to calculate this correctly when you eventually sell.

In TurboTax, you enter it through the business income section under Schedule C. When you get to the expenses part, there's a specific section for "Business use of home." It'll ask for the total square footage of your home and the square footage used exclusively for business. Then it will walk you through either the simplified method (standard $5 per sq ft up to 300 sq ft) or the regular method where you enter actual expenses including depreciation.

Thanks for this! Where exactly is that option? I searched around but couldn't find the specific "return of excess contributions" checkbox.

When you enter the 1099-R information, there should be a question about the type of distribution. One of the options is "return of excess contributions." It's in the section where you're entering the distribution code from Box 7. If you've already entered it differently, you can go back and edit the 1099-R entry. Look for "Your Income" in the left sidebar, then find the 1099-R entry and click on it to edit. The option should appear during the workflow.

Call the IRS directly? Lol good luck with that. I tried calling 8 times this season and either got disconnected or told the wait time was 2+ hours. Never actually spoke to anyone.