Why Does My Co-worker Always Owe Taxes Every Year? How to Fix Withholding Issues?

I work with a friend at Target and I'm trying to help him figure out why he always ends up owing taxes at the end of the year. Looking at his recent paystub, his situation seems pretty straightforward: He contributes to the company 401k plan Has medical insurance through work Doesn't claim any dependents (his former spouse claims their child) Very simple financial life - just works and goes home, no side hustles No charitable donations or other deductions When I helped with his taxes last year, we just imported his W2, the system applied his 401k contribution and health insurance (1095), and that was basically it. Yet he still ended up owing around $780 to the IRS. I'm thinking we need to adjust something on his W4, but when we looked at it previously, we weren't sure what to change. Is there a specific percentage or additional withholding amount we should be setting? We must be missing something obvious. Any advice would be super appreciated! I'd like to help him avoid owing again next April.

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18 comments

Miguel Silva

•8M

This is actually a common issue! Your friend's W4 form is almost certainly the problem. Since the 2020 tax reform, the W4 no longer uses "allowances" but instead focuses on actual dollar amounts. There are a few likely reasons he's under-withholding: 1. He might have selected "Single" on his W4, but if he's actually "Single" with head of household status (which doesn't sound like the case here), that would cause under-withholding. 2. If he has any income from other sources that isn't being taxed (side gigs, investment income, etc.), that would require additional withholding. 3. Most likely: he simply needs to indicate an additional withholding amount on Line 4(c) of his W4. What your friend should do is complete a new W4 and specifically add an additional dollar amount to be withheld from each paycheck on Line 4(c). If he owed $780 last year and gets paid bi-weekly, adding about $30 per paycheck ($780 ÷ 26 pay periods) would cover the shortfall.

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Miguel Silva

•8M

There's very little risk of over-withholding by adding that $30 amount - it's calculated based on exactly what he owed last year. If his circumstances haven't changed (same job, same pay rate, same deductions), then it should be pretty accurate. The beauty of setting a specific dollar amount is that it's predictable and easy to adjust. Keep the "Single" filing status since that's correct for his situation. Don't change anything else on the form unless his circumstances have changed. If he gets a significant raise during the year, you might want to recalculate and submit a new W4 with a slightly higher amount to account for the increased income.

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Zainab Ismail

•8M

I had exactly this problem a few years ago and it was driving me crazy! I finally used taxr.ai (https://taxr.ai) to analyze my withholding patterns and it was eye-opening. The system showed that the standard withholding tables were consistently taking out too little for my situation. Turned out I needed to account for a weird quirk in my particular tax situation - my retirement contributions were reducing my withholding too much compared to my actual tax liability. The analysis recommended a specific additional withholding amount that fixed the problem completely. I'm not a tax expert, but I'd suggest having your friend upload his last paystub and W2 to see if there's something specific about his situation that's causing the under-withholding. It literally took 5 minutes and saved me from owing taxes for the first time in years.

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Zainab Ismail

•8M

The recommendation was spot-on for me. I followed exactly what they suggested for additional withholding and ended up with a tiny refund of $43 instead of owing $850 like the previous year. It was such a relief not to have that tax bill hanging over me. For your question about how it works - it's not just a calculator, it actually analyzes your specific tax documents and identifies patterns the IRS calculators miss. In my case, it caught that my combination of 401k, HSA, and income level was creating a specific withholding issue. The IRS calculator is very general and doesn't catch these specific situations.

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Connor O'Neill

•8M

Update on my situation since I was skeptical about taxr.ai from the comment above. I decided to try it last week since I've been plagued with the same issue (always owing despite a simple return). I uploaded my last pay stub and W2 from last year, and it immediately identified that my company's payroll system was calculating withholding as if I was getting the full standard deduction every pay period, but because of my 401k structure, I actually needed more withheld. The report suggested adding exactly $42 per biweekly paycheck in additional withholding. I took the report to HR yesterday, filled out a new W4 with the extra withholding amount, and they confirmed this should prevent me from owing next year. The explanation made perfect sense, and I'm annoyed that neither my HR department nor the tax prep software I used ever flagged this issue across multiple years.

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Keisha Robinson

•8M

After struggling with the IRS phone lines for weeks trying to get help with a similar withholding problem, I finally discovered Claimyr (https://claimyr.com). They got me connected to an actual IRS agent in under 15 minutes who walked me through exactly how to fix my withholding issues. You can see how it works here: https://youtu.be/_kiP6q8DX5c My issue was that I had multiple jobs but they were each withholding as if that was my only income, which meant I was dramatically under-withholding overall. The IRS agent explained exactly how to fill out the "Multiple Jobs" worksheet on the W4 and what additional withholding amount to use. The service saved me hours of hold time and the agent was actually really helpful once I got through. Completely worth it for getting personalized advice directly from the IRS.

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Keisha Robinson

•8M

It works by using a callback system that continually redials and holds your place in line. When you get close to an agent, you get a call letting you know you're about to be connected. No secret backdoor or priority access - they're just automating the hold process so you don't have to sit there all day. The IRS agents are the same ones everyone talks to - it's just that the service handles the hold time for you. I was skeptical too, but when I got the call saying "you're about to be connected to the IRS," and then immediately had an actual agent on the line, I was amazed. The agent walked me through exactly what boxes to check and amounts to enter on my W4 to fix my specific situation.

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Paolo Ricci

•8M

I need to follow up on my skeptical comment above about Claimyr. I decided to try it since I was desperate to figure out why my withholding was messed up despite having a simple W2 job. Got connected to an IRS rep in about 25 minutes (not the 15 they advertise, but still WAY faster than my previous attempts). The agent actually reviewed my specific situation in detail and explained that because I have a specific type of high-deductible health plan, the payroll withholding tables weren't accurately accounting for my tax situation. She walked me through exactly what to put on my W4 Line 4(c) for additional withholding and explained why the standard calculation wasn't working for me. I've already submitted the new W4 to my HR department. Honestly shocked that this actually worked - sometimes being wrong feels pretty good.

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Amina Toure

•8M

Has your friend checked if they qualify for any tax credits? Sometimes the issue isn't just withholding but missing opportunities to reduce the tax bill. Since you mentioned they have an ex who claims their child, they might qualify for some credits even if they don't claim the child as a dependent. Also, if they're contributing to a traditional 401k, they might consider looking into whether a Roth 401k would be better for their tax situation in the long run. Won't help with the immediate withholding issue but could be better tax-wise over time.

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Amina Toure

•8M

If he pays child support, he should look into whether he qualifies for the noncustodial parent earned income credit in his state (some states offer this). While he won't qualify for the federal EIC without claiming the child, he might be eligible for other adjustments. For the 401k, Traditional reduces his taxable income now but taxes later, while Roth is taxed now but tax-free later. If he's in a lower tax bracket now than he expects to be in retirement, Roth often makes more sense. Either way, remind him that his 401k contribution percentage might need to be adjusted if he switches types to maintain the same take-home pay.

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