Correct W-4, incorrect witholding Hi there!
I have a question that is less about what to do and more about how taxes work. The question is: If you fill out your W-4 correctly and choose the correct amount of personal allowances for your situation and your personal situation remains unchanged (no marriage, no kids, no out of pocket business expenses, no charitable gifts, literally nothing), then how can you end up owing Federal taxes for that year?
Ex: I'm unmarried, work full time and have no dependents. I enter "2" on my W-4 and check the "single" box. By the end of the year nothing has changed. When I do my taxes, I owe $300 to Federal.
How is this possible? If I put the correct amount of personal allowances (also being single with no dependents shouldn't they tax me basically as high as possible?) shouldn't the correct amount of $$ be withheld from my paycheck? If my personal/financial situation hasn't changed, then what has changed on the IRS side?
I understand that you can use tax worksheets provided by the IRS to project your taxes and then designate an extra amount of $$ to come out of your check to try and curb that but why should I have to do that if I'm filling out everything correctly?
Thank you!
~Mel |