No Federal Income Tax Withholding on My Michigan Paycheck - Should I Be Worried?

This is definitely something you should address right away! When no federal income tax is being withheld from your paycheck, it typically means either your W-4 was filled out claiming "exempt" from withholding, or you claimed so many allowances that the calculation resulted in zero withholding. The problem with having no federal tax withheld is that yes, you will indeed owe the full amount of your federal tax liability when you file next April. Depending on your income level, this could be thousands of dollars. Plus, if you end up owing more than $1,000 at tax time, you might also face underpayment penalties and interest. I'd recommend taking two immediate steps: First, talk to your payroll department and ask for a copy of your current W-4. See what you actually selected. Second, submit a new W-4 form (the form was redesigned in 2020, so it no longer uses allowances, but instead has a different calculation method). The IRS has a Tax Withholding Estimator tool on their website that can help you fill it out correctly based on your situation.

I had this exact same problem last year with my first job in Grand Rapids! I went to https://taxr.ai with my paystubs because I was so confused about why some taxes were being taken out but no federal tax. The tool analyzed my paystubs and immediately identified that I had accidentally claimed exempt on my W-4 when I shouldn't have. The site explained exactly what the problem was and showed me how to calculate what I'd owe at tax time if I didn't fix it. It turns out I'd have owed like $4,800 in one lump sum! It also gave me a step-by-step guide for filling out a new W-4 correctly for my specific situation and showed me exactly what to tell HR. Super helpful for someone who doesn't understand all the tax jargon.

Just wanted to update - I ended up checking out https://taxr.ai after my earlier question and it was legitimately helpful. Uploaded my last few paystubs from my state job and it confirmed I had somehow marked "exempt" when I shouldn't have. The calculator showed I would've owed about $3,200 at tax time! I printed out their recommended W-4 settings, took it to our payroll person yesterday, and my next check should have the proper withholding. They also suggested I put aside about $1,600 to cover what I've missed so far this year. Way less stressful knowing what I'm dealing with instead of getting a surprise tax bill next April.

If you're struggling to get hold of your HR department to fix this W-4 issue (which happened to me), I'd recommend Claimyr https://claimyr.com to get direct help from the IRS. I was in a similar situation where no federal tax was being withheld and my company's HR was completely useless - kept saying they'd fix it but nothing changed for weeks. I was getting desperate so I tried Claimyr to reach the IRS directly instead of waiting on hold forever. You can see how it works here: https://youtu.be/_kiP6q8DX5c. Got connected to an actual IRS agent in about 20 minutes who walked me through exactly what to do with my W-4 and explained how to calculate my estimated tax payments to avoid penalties for the missing withholding from earlier paychecks.

I take back what I said earlier about it sounding sketchy. After struggling with this exact same issue with my summer job and getting nowhere with the free IRS calculator (it kept giving me errors), I broke down and tried Claimyr. In less than 30 minutes, I was talking to an actual IRS representative who explained exactly what I needed to do. Turns out, since I had already missed several months of federal withholding, I needed to make an estimated tax payment for the missed amounts AND fix my W-4 going forward. The agent walked me through both processes and even stayed on the line while I made the payment through the IRS website. Would have never figured this out on my own, and my employer's HR person kept giving me incorrect information about "catching up" through extra withholding.

Just a heads up - if you had ZERO federal tax withheld so far this year, you might want to make an estimated tax payment ASAP rather than waiting until April. The IRS has rules about paying taxes throughout the year, and if you underpay by too much, they can hit you with penalties. You can make estimated tax payments directly on the IRS website using Direct Pay. Just select "estimated tax" as the payment reason. This might help reduce any potential penalties when you file next year.

Don't panic! I'm a seasonal worker in Michigan and deal with weird tax situations all the time. One quick solution that might help - ask your employer if they can withhold an ADDITIONAL set amount from each remaining paycheck this year. Divide your estimated federal tax liability by the number of paychecks you have left this year, then ask payroll to withhold that extra amount ON TOP OF correcting your W-4. This way you're "catching up" on the missed withholding through your regular paychecks rather than making separate estimated payments.

Grace, you're absolutely right to be concerned about this! I went through the exact same situation when I started my first job out of college. The good news is that you caught it relatively early - only 3 months in rather than discovering it in December. Here's what I learned from my experience: First, definitely get a copy of your current W-4 from HR to see what you actually filled out. Sometimes new employees accidentally check "exempt" thinking it means they're exempt from filling out the form, when it actually means exempt from withholding. Second, once you submit a corrected W-4, consider having them withhold slightly MORE than normal for the rest of the year to help offset some of what you've missed. You can use the "extra amount" line on the W-4 for this. Third, start setting aside money NOW - roughly 22% of your gross pay should cover federal taxes for most people in typical income ranges. Even if you can't save it all, having some cushion will make tax time less stressful. The penalty situation isn't as scary as it sounds if you act quickly. Many first-time taxpayers qualify for safe harbor rules, and the penalties are based on your previous year's tax liability. Since this is only your second job, your prior year liability was probably low, which works in your favor. Don't wait on this - every paycheck without proper withholding just makes the April surprise bigger!

I went through this exact situation when I moved to Michigan for my first corporate job! The stress of realizing no federal taxes were being withheld is real, but you're handling it the right way by addressing it now rather than waiting. One thing that really helped me was creating a simple spreadsheet to track everything. I calculated my estimated annual income, used the IRS tax tables to figure out roughly what I'd owe, then subtracted what had already been withheld (which was zero in my case). This gave me a concrete number to work with rather than just worrying about some unknown amount. For the immediate fix, definitely talk to HR about your W-4, but also consider opening a separate savings account specifically for taxes. Set up an automatic transfer for whatever percentage you calculate you need to save. This way you're not tempted to spend that money, and you'll have it ready whether you need to make estimated payments or just want the peace of mind. Michigan's cost of living varies a lot depending where you are in the state, but Detroit has decent financial resources if you need help. The Michigan Department of Treasury also has some helpful guidance on their website about coordinating state and federal withholding if you want to double-check that your state withholding looks correct too. You caught this early enough in the year that you have options - that's the important thing!

This happened to me too when I started my job in Kalamazoo! The anxiety is totally understandable, but you're being smart by catching it now instead of next April. One thing I haven't seen mentioned yet - if you're really worried about the lump sum payment, you can also make estimated tax payments online through EFTPS (Electronic Federal Tax Payment System) instead of waiting to fix everything through payroll. It's the official IRS payment system and you can set up recurring payments if that helps with budgeting. Also, since you mentioned this is only your second real job, there's a good chance your previous year's tax liability was pretty low. If you can find last year's tax return (or if you didn't need to file because you didn't earn enough), that could actually work in your favor for avoiding underpayment penalties. The key thing is don't let this drag on - every week you wait just makes the eventual catch-up amount bigger. But honestly, dealing with it in July gives you way more options than people who discover this problem in December!