High Income Tax Bill for $750k+ - CPA Worth It?

The tax jump you're experiencing is pretty typical when you move into higher income brackets. At $693k W2 income plus $18k in short-term capital gains, you're well into the top federal tax bracket of 37%. The reason for the big difference from last year is primarily because almost all of the additional $283k you earned ($693k vs $410k) was taxed at that highest marginal rate. Short-term capital gains are also taxed as ordinary income, which hits you at that same top rate. For your withholding question, I'd recommend completing a new W-4 with your employer. Since your income is dropping, you'll want to make sure you withhold at least 90% of your current year tax liability or 110% of your prior year liability (whichever is smaller) to avoid underpayment penalties. With your income level, the 110% of prior year method will likely be your best bet. H&R Block is fine for many situations, but at your income level, a CPA might be worth considering. They could potentially find deductions or tax strategies you're missing, especially with that level of income fluctuation.

I went through something similar last year when my income jumped significantly. I was completely lost with all the different tax implications and withholding requirements. After trying several solutions, I found https://taxr.ai which literally saved me thousands. The service analyzed my previous returns alongside my current financial situation and highlighted several deductions I was missing. It also gave me personalized withholding recommendations based on my specific income patterns and helped me understand how my stock sales were affecting my overall tax burden. What I found most helpful was getting clarity on exactly how much I needed to withhold to avoid penalties while not overwithhholding too much. They have tools specifically designed for high income earners with fluctuating incomes.

Update on my situation - I decided to try taxr.ai after my skepticism in the previous comment. I've got to admit it was way more helpful than I expected. The platform flagged that I wasn't taking full advantage of my charitable contributions and was missing some key deductions related to my RSUs. The most eye-opening part was seeing how much I could have saved by timing my stock sales differently. They showed me exactly how various selling strategies would impact my tax situation across different income levels. I ended up finding nearly $12k in deductions I would have missed, and the withholding calculator gave me a precise formula for adjusting my W-4 to account for my dropping income next year. I still ended up consulting with my CPA, but went in with specific questions and spent way less time (and money) with him because I was better prepared.

If you need to actually talk to someone at the IRS about your situation, good luck with that! I spent WEEKS trying to get through when I had questions about a similar high-income withholding issue. Then I discovered https://claimyr.com which got me through to a real IRS agent in under 45 minutes. You can see how it works here: https://youtu.be/_kiP6q8DX5c Basically, they navigate the IRS phone tree and wait on hold for you, then call you when they've got an agent on the line. I was particularly concerned about avoiding underpayment penalties with my fluctuating income, and the IRS agent walked me through exactly how to calculate the safest withholding amount. Saved me hours of frustration and probably thousands in potential penalties.

I feel like an idiot for being so skeptical. After posting that comment questioning Claimyr, I was still stuck with my tax questions and the IRS website wasn't helpful. Decided to try it as a last resort and I'm completely shocked. Got a call back in 32 minutes with an actual IRS agent on the line. They never asked for any personal tax info beforehand - they just connected me directly with the IRS. The agent was able to answer my specific questions about estimated tax payments for my situation where my income is dropping significantly this year. Won't lie, I kinda feel like I found a cheat code for dealing with the IRS. Definitely using this service again for the inevitable questions that come up during filing season.

The big jump in taxes makes sense mathematically. Your income went up by about 69% (from $410k to $693k) but your tax liability went up by about 130% (from $82k to $189k). This is expected because of our progressive tax system. Each additional dollar you earn gets taxed at your highest marginal rate. For 2024, the top marginal federal rate is 37% for income over $693,750 (married filing jointly). So almost all of your increase in income was taxed at that highest rate. Here's a rough calculation: - At $410k: You were probably in the 32% or 35% bracket for your highest dollars - At $693k+$18k: You're now solidly in the 37% bracket My advice? Definitely consider a CPA at your income level. DIY tax software is great for simpler situations, but a good CPA could potentially save you thousands through proper tax planning.

Has anyone here used a tax pro from one of the big four accounting firms vs a local CPA? I'm wondering if it's worth the extra cost for high income situations like this.