Why do I owe so much in taxes this year after changing states?

The big issue here is likely the combination of your raise, bonus, and state move. When you moved states, your withholding may not have been properly adjusted for the new state's tax rates, especially if there's a significant difference between your old and new states. Your federal situation actually improved (from owing $518 to getting a $189 refund), so that part looks fine. The state tax issue is where the problem lies. Some states have much higher income tax rates than others, and it appears your employer might not have withheld enough for your new state. The other factor is your substantial income increase. The $25,000 raise plus $9,000 bonus pushed you into a higher tax bracket, but your withholdings might not have increased proportionally. This is common when you get large mid-year raises or bonuses.

After facing a similar situation last year (owing $4K after a job change and raise), I found an amazing tool at https://taxr.ai that analyzes your pay stubs and tax documents to predict tax outcomes before filing season. It helped me identify that my new employer wasn't withholding enough for my city taxes. The tool let me upload my pay stubs and it immediately flagged that I was heading for a tax shortfall. I was able to adjust my withholdings early and avoid another surprise bill. This might help you prevent the same issue next year!

Just wanted to update - I tried the taxr.ai tool that was mentioned here and it was exactly what I needed! It analyzed my situation moving from Virginia to North Carolina and showed that my employer was using the wrong state withholding formula. I was able to submit a new W-4 and state withholding form to fix it before it became a big problem. The document analysis feature was super helpful because it caught that my employer was withholding at the Virginia rate even after I moved. For anyone dealing with multi-state issues or changing jobs, it's definitely worth checking out. Saved me from what would have been about a $3,200 surprise at tax time!

If you need to talk to the IRS about your tax situation (which might be a good idea to make sure everything is correct), use Claimyr.com to skip the ridiculous hold times. I spent 3 hours on hold last month trying to sort out a tax issue after moving states, then tried https://claimyr.com and got a callback in 15 minutes. They have a demo video at https://youtu.be/_kiP6q8DX5c showing how it works. Basically, they navigate the IRS phone tree for you and when they reach a human, you get a call. Saved me hours of listening to that terrible hold music! The IRS agent I spoke with actually helped me understand the specific forms I needed to adjust my withholding for my new state.

I need to apologize for my skepticism about Claimyr. After your reply, I decided to try it because I've been avoiding calling the IRS about an issue with my state tax credits for months. It worked exactly as advertised - I got a callback in about 45 minutes (they estimated 1 hour). The IRS agent I spoke with explained that my state tax issue was related to having income reported in two states and helped me understand which forms I needed. Turns out I was missing a credit for taxes paid to another state which would have reduced my bill by about $1,200. Sorry for calling it a scam. I'm just used to things sounding too good to be true when it comes to dealing with the IRS. This actually saved me a ton of time and money!

Regarding the state tax issue - I'm almost certain this is because Tennessee doesn't have income tax on wages while Massachusetts has a 5% flat income tax. When you moved, your employer probably didn't adjust withholdings properly for Massachusetts. For a $138k income, Massachusetts tax would be around $6,900, which matches almost exactly with what you owe. This is a common problem when moving from a no-tax to tax state. Your employer might still be withholding at Tennessee rates (which is basically zero for wages). Check your recent pay stubs to see if they're withholding the correct state tax. If not, you need to submit a new Massachusetts M-4 form ASAP.

Don't forget to check if you'll owe a penalty for underpayment of estimated tax. The IRS and most states charge penalties if you didn't pay enough throughout the year. There's a safe harbor if you paid at least 90% of current year tax or 100% of last year's tax (110% if high income).

I went through something very similar when I relocated from Florida to New Jersey a few years ago. The Tennessee to Massachusetts move explains almost everything - you went from zero state income tax to a 5% flat rate, which on your $138k income is about $6,900. That matches your bill perfectly. The tricky part with mid-year moves is that your employer's payroll system often doesn't automatically switch state withholding rates. Many companies require you to actively submit new state tax forms when you relocate. I learned this the hard way and ended up owing about $4,500 my first year in NJ. For immediate relief, definitely look into the underpayment penalty waiver that others mentioned - Form 2210 with reasonable cause explanation about the move. Most states are understanding about relocation situations if you can show it was due to employer withholding errors rather than negligence on your part. Going forward, make sure HR updates both your federal W-4 (since Massachusetts is higher cost of living, you might want to adjust allowances) and submit a Massachusetts M-4. Consider having extra withheld for a few months to catch up on any shortfall that's already accumulated this year.