A $2100 drop in return amount due to a second job

Question

I held 2 jobs in 2023.

Job1 a small business I started in 2022, quit in summer 2023.

Job2 a large business I started in early 2023, still working there.

When I was entering my W2 numbers of the 2 jobs. I entered numbers from

job2 first, and it showed that my federal/state return would be

$1700/$1400 respectively. When I then entered numbers from job1, the

return amounts drop to $200/$800 for fed/state, a $1500 and $600 drop

respectively, meaning I owe the government $2100.

I went to job1's office and asked to see the original papers I filled

out. Turns out on the W4, in section 3 claim dependent, since I do have

an adult dependent, I entered 500 per the instruction "multiply the

number of other dependent by $500"; On the W4 for the state, I entered 1

each on line A-no one can claim me as dependent, line B-single and only

1 job (when I signed up for job1 in 2022 I only had that one job), line

D-number of dependent I will claim on my tax return, and line E- filing

as head of household.

Everything was filled out truthfully.

I cross checked my numbers on the 2023 W2 with an ex-coworker at job1,

who worked just for 4 months in 2023. He grossed $10000 and had $900 for

federal withhold. Alas, my gross was $22000 and I had just $950 for

federal withhold. I can see here I was under-withheld for federal and I

can understand if I owed the government $1000ish in tax money, but $2100

is substantial.

BTW, since I started job1 in 2022, my 2022 return was also ~$1500 short

as soon as I entered the W2 numbers from job1. (I held a few other

short-terms jobs in 2022 subsequently)

Job1 uses Quickbook for payroll, and upon my inquiry about the original

papers the manager showed me in the software where they put down $500

following what I had put down on the W4. I don't remember what the

screen says specifically, just the $500 number.

My intuition on this is unfortunately heavily influenced by the extreme

negative working experience at job1 which was why I quit, but I have

also brought the issue to a pro-bono tax professional in town here, who

acknowledges that they didn't withhold enough, but opined that there is

probably no wrongdoing or fraud on the employer's part.

I have not filed my 2023 tax return just yet.

Any advice or opinions?

kiarab · Answer

Yes, it sounds plausible. What happens when you change jobs is if you do not account for income earned from the other job, the estimated taxes are going to be off. When you fill out your W-4, you enter in the exemptions that you qualify for, etc. Every taxpayer also gets the standard deduction. When you do not account for your other income, then the calculations for each job will not use the other income in consideration.

For example, if you earned 20,000 in one job and 30,000 in another and you had no exemptions, then when figuring out estimated taxes withheld for the 20,000 job, they will subtract the standard deduction (for single it is 13,850) and  figure your taxes on the remainder, which is 6,150. For your 30,000 job, it will do the same thing, so your taxable income would be calculated to be 16,150. So your total taxable income is expected to be 22,300.

However, since you earned 50,000 in this scenario, and you only get one standard deduction, the actual taxable income is 36,150. So you can see how the estimate taxes can be pretty off when you do not account for all your wages while filling out the W-4. Especially when you switch jobs.

ploughmansulnch · Answer

Thanks for replying.

Again the job I am still at, if I just enter its 2023 W2 numbers I would be getting $1700 from federal and $1400 from state for return. I intend on keeping this job and next year expect to receive something similar in return.

The other job I quit, which I took up before taking up the job I still have, is the one that didn't withhold enough for whatever reason. Upon enter its 2023 W2 numbers, my federal return decreases by $1500 and state by $600.

My total income from the 2 jobs last year was about $52000, which is, not a lot of money.

There has been advice that there is nothing I can do in this situation. So, does $2100 ($1500 for federal + $600 for state) sound about right what I owe in this case, from having 2 jobs, or for whatever reason?

MatthewD · Answer

Hello Plough,

Thank you for explaining your situations.  Your situation is not uncommon and can happen for a variety of reasons. The most common is when not enough taxes are withheld for the whole year, since you change jobs. Our software will calculate your return accurately based on the information you input.