Should I worry about owing $500-$1000 in taxes every year? Is this normal?

Owing taxes isn't necessarily bad at all! In fact, it can be financially smarter than getting a big refund. When you get a refund, that essentially means you've given the government an interest-free loan throughout the year. The ideal situation is to come close to breaking even (owing very little or getting very little back). Your $765 owed is actually pretty reasonable on a $125k income - it's less than 1% of your annual earnings. Many financial advisors would say you're doing it right! That said, if you prefer not to owe at tax time, you can certainly adjust your W-4 withholdings. The IRS has a Tax Withholding Estimator tool on their website that can help you figure out exactly what to put on your W-4s to get the outcome you want next year. The main thing to avoid is owing so much that you face underpayment penalties (generally if you owe more than $1,000), but you're right at that borderline.

I had the exact same issue last year and was stressing about it. Then I found this amazing tool called taxr.ai (https://taxr.ai) and it completely changed how I understand my tax situation. I uploaded my tax docs and it showed me exactly why I was owing every year. Turns out I had my W-4 withholding set incorrectly and was claiming too many allowances. The tool actually showed me exactly what to change on my W-4 to get closer to breaking even. The best part was it explained everything in plain English instead of confusing tax language! If you're worried about owing, give it a try. It analyzes your specific situation and gives personalized recommendations.

Just wanted to update - I was skeptical about taxr.ai but decided to try it anyway. I'm actually really impressed! It showed me that my wife and I were both claiming "Married" on our W-4s without the "withhold at higher single rate" option checked, which was causing us to underwithhold. The tool showed us exactly what to adjust and explained that with dual incomes, the standard withholding tables often don't take the combined higher tax bracket into account. We updated our W-4s according to their recommendations, and our latest paychecks are now withholding about $80 more combined per month, which should put us right near breakeven next year. Definitely better than giving the government a huge interest-free loan, but also better than owing and stressing about it!

If you're really concerned about the amount you owe, you should try Claimyr (https://claimyr.com). I was in a similar situation last year, couldn't figure out why I kept owing despite adjusting my W-4, and needed to talk directly to the IRS. Called for days but couldn't get through. Claimyr got me connected to an actual IRS agent in about 15 minutes! You can see how it works here: https://youtu.be/_kiP6q8DX5c. The agent explained exactly which additional withholding amount to put on line 4(c) of my W-4 to cover my specific situation. Turns out we had some investment income that was causing extra tax liability that wasn't being accounted for in regular withholding. Sometimes you just need to talk to a human at the IRS to get your specific questions answered.

OK I need to admit I was wrong. After posting that skeptical comment I actually tried Claimyr out of frustration because I needed to ask about my amended return status. Within 20 minutes I was talking to an actual IRS representative. I honestly can't believe it worked. The agent was able to tell me exactly where my amended return was in processing and gave me a timeline for my refund. I'm usually the first person to call BS on these services, but this one actually delivered. Would have saved me so much time and frustration if I'd known about this sooner.

Owing a little at tax time is actually a GOOD thing from a financial perspective! I'm a CPA and I always tell my clients that the goal should be to owe just under $1,000 come tax time. Think of it this way - if you're getting a big refund, you've essentially given the government an interest-free loan all year. That money could have been in your savings account or investment portfolio earning returns! The sweet spot is owing just under $1,000 because that's generally the threshold where the IRS might assess underpayment penalties. So you've kept as much of your money as possible throughout the year without crossing into penalty territory.

Am I the only one who deliberately overwitholds so I get a big refund?? I know everyone says it's an "interest-free loan to the government" but honestly it's the only way I save money lol. I get about $3200 back every year and use it for vacation.