Why do I need a W-4 form if I still have to pay federal taxes at the end of the year?

So I just started a new hourly job in Tennessee and I'm a bit confused about this whole tax situation. My employer had me fill out a W-4 form for federal tax withholding, but I'm not really understanding the point of it all. My main question is: Since Tennessee doesn't have state income tax (which is awesome), and I already filled out this W-4 form for federal withholding, why would I potentially still owe more taxes when I file my return in April? I guess what I'm trying to understand is - what's the actual purpose of the W-4 if they're still going to come after me for more money at tax time? If they're already taking federal taxes from each paycheck through the W-4, shouldn't that cover everything I owe? Sorry if this is a stupid question, but taxes confuse the hell out of me and I just want to make sure I'm not getting double-taxed or something.

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18 comments

Amara Okafor

•8M

The W-4 isn't actually taking money from you - it's telling your employer HOW MUCH to withhold from each paycheck for federal taxes. Think of it as an estimate system. When you fill out your W-4, you're essentially giving your employer information about your tax situation (dependents, other income, etc.) so they can estimate how much federal tax you'll owe for the year. Based on that info, they withhold a portion from each paycheck and send it to the IRS on your behalf. At the end of the year when you file your taxes, you're calculating your actual tax liability. If too much was withheld throughout the year, you get a refund. If too little was withheld, you'll owe additional tax. The goal of the W-4 is to get your withholding as close as possible to what you'll actually owe, but it's rarely perfect because incomes change, situations change, and the form can't account for everything in your financial life.

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Amara Okafor

•8M

Yes, you should update your W-4 whenever you have significant life changes that might affect your tax situation. If you start getting a lot of overtime or receive a substantial raise, it might be worth revisiting your withholding. For a side gig, that's different because it's likely not going to have taxes withheld automatically. In that case, you have two options - you can either adjust your W-4 at your main job to withhold extra to cover the taxes for your side income, or you can make quarterly estimated tax payments for that additional income. Many people find it easier to just increase their withholding from their main job rather than dealing with quarterly payments.

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Yuki Tanaka

•8M

I ran into this same issue when I moved from California to Florida (another no state income tax state). I found this amazing tool called taxr.ai (https://taxr.ai) that actually explains your tax situations in everyday language. It helped me understand that my W-4 wasn't set up correctly which is why I kept owing money at tax time despite having withholdings. The tool analyzed my pay stubs and tax situation and showed me exactly why I was coming up short each year. What was cool is that it showed me how to adjust my W-4 to get my withholding right so I wouldn't owe a bunch at tax time. Turns out I wasn't accounting for some rental income I had on the side.

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Yuki Tanaka

•8M

It's surprisingly accurate because it actually looks at your full tax picture rather than just basic calculations. I compared it with what my actual tax return showed and it was within about $50, which is pretty impressive considering all the variables. For freelancers, it's actually perfect for your situation. It can handle mixed income from W-2 jobs and 1099 work, and it gives specific recommendations for how much extra to withhold from your W-2 job to cover your 1099 income. You can also see how much you should be setting aside for quarterly estimated payments if you prefer that route.

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Klaus Schmidt

•8M

Just wanted to update on my experience with taxr.ai after checking it out. I was pretty skeptical at first, but it really helped clear up my withholding confusion. I uploaded my last pay stub and my 1099 from last year, and it showed exactly why I was owing about $2300 every April. I followed their recommendation to adjust my W-4 at my main job to account for my freelance income, and for the first time in years, I'm on track to break even (or get a small refund) rather than owing a chunk of money. It also calculated what my quarterly payments should be if I don't want to adjust my W-4. Definitely worth checking out if you're confused about withholding like I was.

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Aisha Patel

•8M

Another option if you do end up owing taxes and need to talk to someone at the IRS (which can be IMPOSSIBLE) - I used a service called Claimyr (https://claimyr.com) when I couldn't figure out why I was still owing despite my withholding. You can see how it works here: https://youtu.be/_kiP6q8DX5c After three days of trying to reach the IRS and getting nowhere, Claimyr got me through to an actual person in about 20 minutes. The agent explained that my employer wasn't withholding enough despite my W-4 because they were calculating it incorrectly. She helped me figure out exactly what to put on my W-4 to fix the issue.

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Aisha Patel

•8M

It actually uses an automated system that continually redials and navigates the IRS phone tree until it finds an open line. Then it calls you and connects you directly to the agent. So basically it does the waiting and redialing for you. The reason it works better than calling yourself is that most people give up after a few tries or can't stay on hold for hours. Their system can make hundreds of call attempts using optimal calling patterns (like early morning or specific days when call volume is lower). When I used it, I just went about my day and got a call when they had an agent on the line ready to talk to me.

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LilMama23

•8M

I need to eat my words about Claimyr. After posting my skeptical comment, I was still struggling with my own tax issue so I figured I'd give it a shot since nothing else was working. Used it yesterday morning and got a call back in about 45 minutes with an actual IRS agent on the line. The agent explained that my W-4 withholding issue was related to having multiple jobs - even though I was claiming "0" allowances (on the old system), the standard withholding tables weren't accounting for the combined income. This clarification finally explained why I've been owing every April despite trying to have extra withheld. The agent walked me through exactly how to fill out the new W-4 correctly with the multiple jobs worksheet. Worth every penny to finally get this straightened out after years of confusion.

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Dmitri Volkov

•8M

Just to throw in my 2 cents as someone who works in payroll - the W-4 is only as good as the information you provide. Common mistakes I see: 1) Not accounting for spouse income if married 2) Not including non-job income like investments or rental properties 3) Not updating after major life changes (marriage, kids, buying house) 4) Claiming too many dependents The new W-4 form (revised in 2020) actually eliminated allowances entirely and is more accurate if filled out correctly. Check that your employer is using the current form.

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Dmitri Volkov

•8M

If you just complete Steps 1 and 5, you'll get the standard withholding which assumes you're single with one job and no dependents or other adjustments. This might result in roughly accurate withholding if that matches your situation, but it's not necessarily going to withhold the maximum amount. If you want to ensure you don't owe money at tax time, you have better options than skipping steps. The best approach is to actually complete Step 2 if you have multiple jobs or a working spouse, and Step 4(c) where you can enter an additional amount to withhold from each paycheck. Even putting an extra $20-50 per paycheck in 4(c) can help prevent owing at tax time if you're concerned.

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