Why does my W-2 show Federal withholding as Married but State withholding as Single? Help needed!

So wait, if the state form says Single, doesn't that mean I'm paying MORE in state taxes each paycheck than I would if it said Married? That seems backwards to what I'd expect. Also, should I file a new state W-4 now or is it pointless since the year is almost over?

Yes, you're exactly right - being withheld at Single typically means more state tax is being withheld from each paycheck than if it were set to Married. This is because single filing status generally has higher tax rates than married filing jointly. So in your case, you've likely been overwithholding on state taxes, which means you might get a larger refund when you file your state return. It's not pointless to update your state withholding form now. While it won't change what's already been withheld, it will affect your remaining paychecks for this year. I'd recommend filling out a new state W-4 (or equivalent form for your state) to align with your federal withholding status.

Does this work for all states? I'm in California and our state tax stuff is always extra complicated.

I'm skeptical about these tax tools. How does it handle multiple income sources? My wife and I both have regular jobs plus some freelance income.

Yes, it works for all states including California. I've got friends in California who use it specifically because California's tax system is so complicated. It handles the state-specific calculations automatically. For multiple income sources, that's actually where it really shines. You can upload documents from various sources - W-2s from different employers, 1099s for freelance work, and even investment income. It organizes everything by income type and shows you how different income streams affect your overall tax picture. It's especially useful for seeing how combined incomes impact your tax brackets.

How does that even work? Do they just have people sitting on hold all day for other people? Seems weird.

Yeah right. There's no way they get through any faster than I would. The IRS and state tax departments have those phone trees specifically to make it impossible to reach anyone. I'm calling BS on this.

They have a system that navigates those annoying phone trees and holds your place in the queue. They're not doing anything you couldn't do yourself if you had hours to sit on hold - they just do the waiting part for you. When they reach an actual person, they connect the call to your phone. To the skeptical commenter - I had the exact same thought! I figured it was impossible to get through the system faster than anyone else. But they don't claim to have a "special line" or anything - they just handle the mind-numbing hold time part. I was skeptical too until I tried it and got through to my state tax department after weeks of failing on my own.

Does working remotely sometimes count as working across state lines? I'm in the office 3 days a week but work from home for 2 (in a different state).

Yes, remote work absolutely counts as a multi-state situation if you're physically located in a different state while performing the work. For your 2 work-from-home days in another state, technically that portion of your income is earned in that state. This is called "tax nexus" and many states have different rules about it. Some states have reciprocal agreements that simplify this, but others will expect you to allocate your income and pay taxes based on where the work was physically performed. It's definitely worth checking your specific states' rules because this can significantly impact your withholding and tax liability.

I've used Gusto at my small business for years and never had a withholding issue. But when we briefly switched to QuickBooks Payroll, three employees had similar problems with state vs federal withholding being different. Might be something to how different systems import the W-4 data.

This is such a helpful breakdown! I had no idea about the 2020 federal W-4 redesign causing issues with state forms. That explains so much about why this seems to be happening more frequently lately. One quick question - when you mention running a "tax projection," are there any free tools you'd recommend for that? I'm not super comfortable with tax calculations and want to make sure I'm looking at this correctly before talking to HR. Also, should I be worried about any penalties if the federal underwithholding ends up being significant? We've always gotten refunds in the past, but with both of us working now our situation has changed quite a bit from previous years.

For free tax projection tools, the IRS has a Tax Withholding Estimator on their website (irs.gov/W4App) that's pretty reliable for federal taxes. For state projections, most state tax websites have similar calculators, though they're not always as user-friendly. I've also heard good things about some of the tools mentioned earlier in this thread - taxr.ai seems to handle both federal and state calculations together, which might be easier than juggling multiple calculators. Regarding penalties - the IRS generally won't penalize you if you owe less than $1,000 when you file, or if you've paid at least 90% of the current year's tax liability (or 100% of last year's liability, whichever is smaller). Since you've historically gotten refunds and are likely overwithholding at the state level, you're probably in good shape. But it's definitely worth running those numbers to be sure! The fact that you're catching this now rather than at tax time next year puts you way ahead of most people who discover these issues too late to fix them.

This is exactly what I needed to hear! I was so worried that I'd been massively under-paying somewhere and would get hit with a huge tax bill. It's such a relief to know that the "Single" state withholding actually means I've been paying MORE, not less. I'm definitely going to talk to HR on Monday about getting the state form filled out correctly. Do you know if there's any specific name I should ask for? Like is it called a state W-4 or does it have a different name? I want to make sure I ask for the right thing so I don't confuse our payroll person. Also, did you end up getting a bigger state refund than expected when you filed? I'm curious how much of a difference it actually made in your situation.

The form name varies by state, but most commonly it's called a "State Withholding Allowance Certificate" or "[State Name] Withholding Form." Some states do call it a state W-4. When you talk to HR, you can just say "I need to update my state tax withholding to match my federal filing status" - they'll know exactly what form you need. In my case, I ended up with about $800 more in state refund than I was expecting! The difference was pretty significant because I'd been overwithholding for about 10 months. It definitely helped balance out the small amount I owed on the federal side. One tip: when you fill out the state form, make sure your withholding elections match your actual filing intentions. If you and your husband file jointly, make sure both your federal and state withholding reflect that same status going forward.