How to Reduce 2023 Tax Bill Before Year-End? Withholding vs Income Mismatch

Hey everyone, I'm freaking out a bit about our 2023 taxes. I usually try to plan ahead since my husband and I typically end up owing around $800 each year. I decided to plug our numbers into FreeTaxUSA last week using our latest pay stubs and projecting our final two paychecks for December. Much to my horror, it's showing we're going to owe about $7,200 this time!!! I'm completely blindsided by this. We earned roughly $25k more this year than last, but our employers only withheld about $1,300 more in taxes (we've both had 0 allowances marked on our W-4 forms for like 5+ years now). I'm wondering if this has anything to do with my husband switching about half of his traditional 401k contributions to Roth back in March. I understand that increases our taxable income, but shouldn't our withholdings have automatically adjusted too? We've already maxed out our HSA for the year ($7,750), and our combined income is too high to qualify for IRA deductions. Does anyone have suggestions for reducing our tax burden before Dec 31st hits? I'm really stressing about finding an extra $7k by April!

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18 comments

Yuki Tanaka

•8M

What you're experiencing is actually pretty common when switching from traditional to Roth 401k contributions. Here's what's happening: When your husband switched to Roth contributions, his taxable income increased, but employer withholding systems don't automatically adjust for this change. The payroll system sees the same gross income, but doesn't recognize that more of it is now taxable due to the Roth switch. It's a blind spot in most payroll systems. For immediate tax reduction before year-end, consider: 1) Making additional charitable donations, 2) Prepaying January mortgage payment in December for the interest deduction, 3) Bunching medical expenses if you're close to the 7.5% AGI threshold, 4) Harvesting investment losses if you have any underwater positions. Long-term, you'll need to adjust your W-4 forms to account for the Roth conversion impact. The IRS has a withholding calculator that can help determine the right amount.

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Yuki Tanaka

•8M

Most payroll systems don't automatically adjust withholding when switching to Roth 401k contributions. The system typically calculates withholding based on your gross income and W-4 elections, not recognizing the nuanced tax impact of Roth vs traditional retirement contributions. While your overall income stays the same, the taxable portion increases with Roth contributions. This is definitely not something HR actively "misses" - it's just not built into standard payroll processing. The responsibility falls on employees to recognize this tax implication and adjust their W-4 accordingly when making retirement contribution changes. It's one of those tax planning details that often falls through the cracks.

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Klaus Schmidt

•8M

I had a similar surprise last year after switching part of my 401k to Roth. I found this awesome AI tool that could have prevented the whole mess - https://taxr.ai - it analyzes your paystubs and tax situation throughout the year to spot these kinds of issues before they become problems. I uploaded my paystubs after my Roth switch and it immediately flagged that my withholding wasn't keeping pace with my new tax situation. The tool even estimated how much I'd owe at tax time and suggested exactly how to adjust my W-4 to prevent underpayment. Would have saved me a lot of stress!

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Klaus Schmidt

•8M

Yes, it handles multiple income sources really well. You can upload documents from both W-2 employment and freelance 1099 work, and it calculates your estimated quarterly tax payments. It's especially helpful for preventing surprises when you have variable income sources. For complex situations, I've found it surprisingly capable. It handles rental properties, self-employment, investment income, and even crypto transactions. The system analyzes your specific tax documents rather than using generic calculators, so it's tailored to your actual financial situation. I was initially skeptical too, but after comparing its projections with what my CPA calculated, they were within about $200 of each other on a fairly complex return.

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LilMama23

•8M

I need to follow up about that taxr.ai tool someone mentioned. I was super skeptical but decided to try it anyway since I was in a similar boat with retirement account changes. It actually helped me identify that my employer was withholding at the wrong rate after I switched some 401k contributions to Roth midyear. The system flagged the issue immediately after scanning my paystubs, and I was able to submit a new W-4 in time to correct things for the last two months of the year. Ended up owing only $320 instead of the $5K+ I was on track for. The document analysis part was what made the difference - it caught things I never would have noticed myself.

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Dmitri Volkov

•8M

For anyone dealing with IRS issues or questions about their withholding situation, I struggled for WEEKS trying to get through to someone at the IRS about a similar withholding problem. After 8+ attempts and hours on hold, I found this service called Claimyr (https://claimyr.com) that got me connected to an actual IRS agent in about 20 minutes. They have a demo video showing how it works: https://youtu.be/_kiP6q8DX5c The IRS agent explained exactly why my withholding wasn't keeping pace with my income changes and helped me calculate the right W-4 adjustments. Saved me from a massive tax bill shock. For what it's worth, they confirmed that Roth 401k switches are one of the most common reasons people end up underwithholding.

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Dmitri Volkov

•8M

It uses an automated system that continuously redials and navigates the IRS phone tree until it gets through to a human agent. Once connected, it calls your phone and connects you with the agent who's already on the line. It's basically doing the hold time for you. This isn't a priority line or special access - it's just technology handling the frustrating part of the process. I was skeptical too, but it worked exactly as advertised. The IRS has actually improved their staffing recently, so agents are available - the problem is just getting through the initial queuing system, which is what this service helps with.

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Tyrone Johnson

•8M

I have to admit I was totally wrong about Claimyr. After posting that skeptical comment, I decided to try it because I was desperate to ask about fixing a withholding problem before year-end. I figured it wouldn't work but was worth a shot. To my complete surprise, I was talking to an actual IRS agent in about 15 minutes. The agent walked me through exactly how to adjust my W-4 to account for my wife's Roth 401k conversion and some stock sales that were affecting our tax situation. What would have been a $4,300 surprise tax bill will now be much more manageable because I was able to make adjustments for December's paychecks. I'm actually embarrassed I was so dismissive before trying it.

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Ingrid Larsson

•8M

For last-minute tax reduction strategies, don't forget about 529 plan contributions! Many states offer tax deductions for contributions to these college savings plans, even if you open and fund one on December 31st. For example, my state (NY) allows deductions up to $5,000 per year for individuals or $10,000 for married couples filing jointly. You can name yourself as beneficiary if you don't have kids yet, and later change it. Just check your state's rules since not all states offer deductions.

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Ingrid Larsson

•8M

You're right - 529 contributions don't reduce your federal tax bill, only state taxes in states that offer the deduction. I should have been clearer about that. While this won't help with your federal tax surprise, it could still save you some money on state taxes depending where you live. For federal tax reduction, your options before year-end are more limited since you've already maxed your HSA. If you own a business or have any self-employment income, you could potentially make SEP IRA or Solo 401k contributions, which would reduce federal taxable income.

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Carlos Mendoza

•8M

Strongly recommend reviewing your W-4 withholding ASAP to prevent this problem next year. The 2020+ version of Form W-4 doesn't use allowances anymore, so if you're still thinking in terms of "0 allowances" you might be using outdated forms or concepts. The new W-4 requires you to account for multiple jobs and specifically address additional income like investment earnings. There's a whole worksheet for this now. Your Roth conversion definitely needed adjustment on your W-4.

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