Why do I owe federal taxes despite withholding from my job income?

The most likely reason you owe taxes is that your withholding didn't keep pace with your income increase. When you got that promotion and your income jumped significantly (from $90k to $130k take-home), your tax liability increased proportionally, but your withholding might not have adjusted properly. While bonuses are often withheld at a standard supplemental rate (usually 22%), that might not be enough if your overall income puts you in a higher tax bracket. The withholding on bonuses is simply an estimate, not a final tax calculation. The easiest fix would be to update your W-4 with your employer. You can either request additional withholding from each paycheck (there's a specific line for this on the W-4) or reduce your allowances. This is especially important with variable income like yours in sales.

I had almost the exact same situation last year with a big promotion and owing unexpected taxes. After trying to figure it out for weeks, I finally used taxr.ai (https://taxr.ai) and it made everything super clear. I uploaded my pay stubs and tax docs, and it showed me exactly where my withholding wasn't keeping up with my income jumps. The analysis pointed out that my supplemental income (bonuses, etc.) wasn't being withheld at a high enough rate for my new tax bracket. It also gave me a customized recommendation for updating my W-4 based on my specific compensation structure. Seriously saved me from making the same mistake again this year.

Just wanted to follow up - I gave taxr.ai a try after seeing it mentioned here, and wow, it was eye-opening! I uploaded my documents and discovered my employer was using outdated withholding calculations that weren't accounting for my recent promotion properly. The tool showed me exactly how to fill out a new W-4 for my specific situation with mixed W-2 and 1099 income. It even generated a personalized withholding recommendation letter I could give to HR. Already submitted the changes and my latest paycheck shows much better withholding. Wish I'd known about this months ago!

If you're trying to contact the IRS to get clarification on your withholding situation, good luck... I spent 3 weeks trying to get through to someone. After wasting hours on hold, I finally used Claimyr (https://claimyr.com) to get a callback from the IRS. You can see how it works in this demo: https://youtu.be/_kiP6q8DX5c I was skeptical it would work, but they actually got me a callback from the IRS within 2 hours! The agent walked me through exactly why my withholding was off (turns out the issue was with how my employer was classifying my commission income). They even helped me calculate exactly how much additional withholding I should request per paycheck to avoid owing next year.

Ok I need to apologize for my skepticism earlier. After another failed attempt waiting on hold with the IRS for 90+ minutes yesterday (got disconnected AGAIN), I broke down and tried Claimyr. Within about 3 hours, I got a direct callback from an actual IRS agent who walked me through my withholding issues. The agent explained that when you get large variable payments like bonuses, the flat 22% withholding often isn't enough when your total income pushes you into a higher tax bracket. He helped me calculate the exact additional withholding amount I should request on my W-4 based on my expected bonuses for the rest of the year. Definitely worth it just to avoid the soul-crushing IRS hold music!

Your employer is only required to withhold based on how you filled out your W-4 and the standard withholding tables. They don't actually "know" your entire tax situation. In your case, I'm guessing you haven't updated your W-4 since your promotion? A few things that commonly cause underwithholding: - Significant income increases mid-year - Multiple jobs or income sources - Bonus/commission income (often withheld at flat 22% rate) - Outdated W-4 information - Interest or investment income without withholding The easiest fix is updating your W-4 and adding an additional dollar amount to withhold from each check to make up for the shortfall.

The bonuses and variable pay are DEFINITELY why you're owing taxes! I'm also in sales and had this exact problem. Here's the issue - bonuses and commission are usually withheld at a flat 22% rate, but if your total income pushes you into the 24%, 32%, or higher bracket, that 22% withholding isn't enough. For example, if your last $20k of income is taxed at 24%, but only had 22% withheld, you're short by 2% on that portion. Plus, that interest income from your HYSA had zero withholding, so you owe the full tax rate on that.