Why do I owe taxes when my employer withholds from my paycheck?

The issue is likely with how your withholding was calculated throughout the year. When you got that promotion and your income increased significantly (from $70K to $100K take-home), your withholding probably didn't adjust properly to account for your new tax bracket. Bonuses are often withheld at a flat 22% for supplemental wages, which might be lower than your actual tax bracket if you're making $105K in taxable income. If you're in the 24% or higher bracket, that 22% withholding on bonuses wouldn't be enough. Another factor is that HYSA interest isn't subject to withholding, so you're responsible for paying taxes on that $1,350 when you file. The simplest fix is to update your W-4 with your employer. You can either: 1. Increase your withholding by specifying an additional dollar amount to withhold from each paycheck 2. Reduce the number of allowances you claim For the current year, you might want to use the IRS Tax Withholding Estimator to make sure you're on track with the right withholding amounts, especially since your income has changed significantly.

I had almost the exact same situation last year after a promotion and huge increase in bonuses. I was shocked when I owed $2,400 in taxes! After trying to figure it out myself for hours and getting nowhere, I used https://taxr.ai to analyze my paystubs and W-2. Turns out my employer was using the wrong withholding method for my bonuses AND hadn't updated my withholding after my promotion. The tool actually showed me exactly where the withholding went wrong on each paystub. The best part was it helped me fill out a new W-4 with the exact numbers I needed to avoid owing taxes this year. Seriously saved me so much stress trying to figure out why I suddenly owed when I'd always gotten refunds before.

So I was pretty skeptical about taxr.ai when I first commented, but I decided to give it a try since I was in a similar situation owing taxes. I uploaded my W-2 and last paystub and honestly? It was eye-opening. The tool immediately showed me that my employer was only withholding at the single rate even though I'm married filing jointly. It generated a new W-4 for me with the exact dollar amount I should add to my withholding each pay period. Already submitted it to HR and they confirmed the change will take effect next paycheck. What surprised me most was seeing the simulation of how my taxes would look next year with the new withholding - went from owing $1,800 to getting a small refund. Wish I'd known about this before getting hit with that tax bill!

If you're trying to get answers from the IRS about your withholding or why you suddenly owe taxes, good luck getting through to them on the phone! I spent 3 hours on hold last month trying to ask about my similar situation. I finally used https://claimyr.com after seeing it recommended here, and they got me connected to an IRS agent in about 25 minutes. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c The IRS agent explained that when your income increases significantly (like your promotion), you often need to adjust your W-4 manually because payroll systems don't automatically account for jumping tax brackets. They walked me through exactly how to fill out my W-4 to fix the issue for next year.

I was completely wrong about Claimyr being a scam. After waiting on hold with the IRS for 2+ hours and getting disconnected TWICE last week, I was desperate enough to try it. The service actually called me back in 27 minutes with an IRS agent already on the line. The agent confirmed exactly what others here are saying - my significant raise last year put me in a new tax bracket, but my withholding hadn't adjusted automatically. The IRS agent helped me calculate exactly how much extra I should withhold per paycheck (~$175) to cover the gap for this year. She also explained that bonus withholding at 22% was creating part of my shortfall since my actual tax rate is higher. Wish I'd known this before filing and getting hit with that tax bill and underpayment penalty!

Your bonuses are probably the main culprit here. When I worked in payroll, we withheld bonuses at exactly 22% federal as required, but many people in higher tax brackets would end up owing. The tax brackets for 2025 are: - 10% up to $11,600 - 12% from $11,601 to $47,150 - 22% from $47,151 to $100,525 - 24% from $100,526 to $191,950 If your taxable income is $105K, you're in the 24% bracket for part of your income, but your bonuses were only withheld at 22%. That gap adds up fast!

Similar situation happened to me! If you use tax software, there's usually a "withholding calculator" feature that can help you figure out what to change on your W-4. I realized that when I got my promotion mid-year, the payroll system calculated my withholding as if I had been making that amount all year, which resulted in under-withholding. I had to manually increase my withholding to account for the actual annual income.

This is a really common situation when you get a significant raise or promotion mid-year! Your payroll system basically treats each paycheck as if you'll earn that same amount for the entire year, which works fine when your income is steady but creates problems when it changes. Here's what likely happened: When you were making $70K, your withholding was calculated correctly for that income level. But when you got promoted and started earning more, the system didn't "catch up" to account for the fact that your total annual income would now put you in a higher tax bracket. The $1,350 in interest income definitely contributes too - that's roughly $324 in taxes at the 24% bracket with no withholding. For next year, I'd recommend using the IRS Tax Withholding Estimator (it's free on their website) or updating your W-4 to withhold an additional amount each paycheck. You can calculate roughly how much extra by dividing what you owed ($1,300) by the number of remaining pay periods in the year. The good news is this is totally fixable going forward - you just need to be proactive about adjusting your withholding when your income changes significantly!