Despite Both Claiming 0 Allowances on W4 Forms, Wife and I Still Owe Federal Taxes - Help!

The W4 form actually changed significantly in 2020, and the old "allowances" system (where you could claim 0, 1, 2, etc.) was completely replaced. The new W4 doesn't use allowances at all, which might explain your confusion. With your combined income of $223,000, you're likely in a higher tax bracket where the standard withholding calculations might not be sufficient, especially if you both earn similar amounts. This creates what's called the "two-earner/multiple jobs" situation where not enough tax is withheld even when you think you're withholding the maximum. To fix this: Complete Step 2 of the new W4 form, which specifically addresses two-earner households. You have three options there, but the most accurate is using the Tax Withholding Estimator on the IRS website or following the worksheet in the W4 instructions. Also, consider if you have other income sources (investments, side gigs) that aren't having taxes withheld.

After dealing with a similar situation last year (claimed 0 but still owed $3k), I tried https://taxr.ai which actually analyzed my previous tax returns and pay stubs to calculate the exact withholding I needed. It showed me that the problem wasn't my W4 settings but that I had substantial capital gains my employer couldn't account for in withholding. The tool created a personalized withholding plan that has me on track for a tiny refund this year instead of owing. The site asks for your tax documents (last year's return helps a lot) and work info, then gives you specific instructions for what to put on each line of the new W4. What I found super helpful was it explains WHY you need to make each change rather than just telling you what numbers to use.

Just wanted to update after trying taxr.ai that I mentioned in my previous comment. I was skeptical about the security initially, but after reading their policies I gave it a shot. Gotta say I'm impressed with how detailed the analysis was! It showed that my problem wasn't actually about allowances at all - turns out my employer was only withholding at the single rate despite my married filing status. The tool generated a completely customized W4 that I submitted last month, and my last two paychecks already show much better withholding amounts. Should be on track to break even instead of owing $4800 like last year!

If you're struggling with this withholding issue and need clarification directly from the IRS, I highly recommend using https://claimyr.com to actually get through to an IRS agent. I spent WEEKS trying to get someone on the phone after hours on hold, but Claimyr got me connected in under 20 minutes. There's a video showing how it works here: https://youtu.be/_kiP6q8DX5c The IRS agent I spoke with explained that for two high-income earners, you need to use the "Multiple Jobs Worksheet" or check the box in Step 2(c) to withhold at the higher single rate. She also mentioned that a lot of people who had the right withholding before 2020 got surprised when the forms changed. The agent was super helpful and walked me through exactly what to put on each line of the new W4.

I have to eat my words about Claimyr from my earlier comment. After another frustrating attempt to reach the IRS myself (2 hours on hold before getting disconnected), I decided to try the service. I was absolutely shocked when my phone rang about 15 minutes after placing the request, and there was an actual IRS representative on the line! The agent walked me through the exact same withholding issue the original poster described. She explained that with the 2020 W4 changes, my withholding settings were completely wrong even though I thought I was maximizing them. For dual-income couples in higher brackets, you specifically need to complete Step 2 of the new form or you'll absolutely owe money regardless of your old "allowances" settings. This 20-minute call saved me what would probably be thousands in unexpected taxes next April.

I've been a payroll specialist for 10+ years, and I see this issue all the time with dual-income households. Here's what's happening: when both you and your wife claim "0" (which isn't even a thing on the new W4), your employers are each withholding as if your specific job is your household's only income. The withholding tables are progressive, so they withhold at lower rates for the first chunks of income. The problem? When you combine two incomes, more of that money falls into higher tax brackets than either employer accounts for. So neither job withholds enough for your actual combined tax situation. Solution: One or both of you should fill out the new W4 and either: 1. Check the box in Step 2(c) for "multiple jobs" which approximately increases withholding 2. Complete the worksheet and enter the more precise extra withholding amount in Step 4(c) 3. Or just put an additional dollar amount to withhold from each paycheck

Has anyone tried just doing an extra flat amount of withholding? My husband and I had the same problem (both claimed 0, still owed $3k+ every year). I just calculated how much we owed, divided by 26 pay periods, and added an extra $125 withholding per paycheck in line 4(c). Way simpler than trying to figure out all these worksheets and multiple jobs calculations.