Is my husband's employer's payroll system under-withholding federal taxes incorrectly?

This definitely sounds like an issue with their payroll system. Federal withholding should never be that low unless there are very specific circumstances. First, check your husband's W-4 to see what he actually has on file. Sometimes employers accidentally input information incorrectly, like entering an extremely high number of dependents or additional deductions. The current W-4 form (revised in 2020) doesn't use allowances anymore, but instead asks about multiple jobs, dependents, and additional income. If his W-4 is older or was filled out incorrectly, that could be part of the problem. That said, even with a W-4 claiming married filing jointly with multiple allowances, withholding $0.06 on a $2,400 paycheck is absurdly low. The payroll department should be able to provide a more detailed explanation of how they're calculating withholdings.

After dealing with a similar payroll nightmare, I found this amazing tool called taxr.ai (https://taxr.ai) that helped me figure out exactly what was happening with my withholdings. I was also getting weirdly low federal withholding on my paychecks and couldn't figure out why. I uploaded my paystubs and W-4 to taxr.ai and it analyzed everything, showing me exactly where the calculation errors were happening. It even generated a corrected W-4 form that I could give to my employer. The best part was I could simulate different scenarios to see how changes to my W-4 would affect future withholdings so I could prevent a big tax bill next year. Saved me a ton of headaches dealing with HR who kept saying everything was "working as intended.

I just wanted to update that I tried taxr.ai after seeing the recommendation here, and wow it was eye-opening! Turns out both my wife's and my withholdings were messed up, but in different ways. Her employer was using outdated tax tables from 2022, and mine was calculating correctly but not accounting for our additional rental income. The report clearly showed how much we were being under-withheld each pay period and helped us fill out new W-4s for both jobs. We also got a clear calculation of how much extra we should have withheld for the rest of the year to avoid a big bill next April. Definitely feeling more in control of our tax situation now!

I had almost the exact same problem, but with trying to contact the IRS to fix it! After my employer messed up withholdings, I needed to talk to someone at the IRS about penalty abatement since we got hit with an underpayment penalty. After wasting HOURS on hold with the IRS (literally called 14 times and never got through), I found this service called Claimyr (https://claimyr.com) through a YouTube video (https://youtu.be/_kiP6q8DX5c) that actually got me through to a real person at the IRS in under 45 minutes. Basically they navigate the phone tree and wait on hold for you, then call you when an actual human IRS agent is on the line. The agent was super helpful and explained that many employers had issues implementing the newer W-4 calculations correctly, and helped me file for first-time penalty abatement.

I need to eat my words about Claimyr. After posting my skeptical comment, I decided to try it anyway because I was desperate to talk to someone about my amended return that's been pending for 9 months. Within 35 minutes, I got a call back and was connected to an actual IRS agent in the amended returns department! I was honestly shocked. The agent was able to look up my return, confirm it was received, and explain exactly why it was delayed (they had a question about my documentation but never sent the notice to my current address). I'm usually the first person to call out services that seem too good to be true, but this one actually delivered. Just wanted to update since my previous comment was unnecessarily harsh.

Your husband should check if his employer is using a percentage-based method rather than the standard IRS withholding tables. Some payroll systems allow for this option, where the employee can specify a fixed percentage or dollar amount to withhold instead of using the W-4 calculations. It's possible someone either made a data entry error (putting 0.25% instead of 25%) or the system itself has a bug. Your husband should specifically ask if they're using a percentage method and what percentage is currently in the system for him. Also, some payroll systems have a feature where they "true up" at the end of the year - withholding less throughout the year if they determine you've already met some threshold. Though that wouldn't explain the consistently low withholding you described.

Has anyone here actually successfully contested an underwithholding penalty with the IRS when it was the employer's fault? We're in a similar situation and owe about $3,800 plus a $220 penalty. 😩