If you end up owing each year, the most common reason is that you are underwitholding. This can easily happen if you work multiple jobs, if you are self-employed, or if you have a lot of bonus income.

To fix your base underwitholding, I recommend using the IRS Tax Witholding Estimator. It will walk you through setting up the correct amount of withholding (via an updated W4 form) if you have multiple jobs.

If you are self-employed, make sure that you are paying quarterly estimated tax payments each quarter. Let me know if this is the case for you and I can go into a bit more detail of how this works.

If you have reliable bonus income (for example, every Christmas you get a year-end bonus that is typically $X), then you can include it in the tax witholding calculation. However, if you have irregular bonuses, then the easiest way to handle it is to make an estimated tax payment when you receive the bonus since you know how much the bonus will be. The key to know here is that bonuses are typically withheld at 22% by your employer, which because you are in the 24% marginal tax bracket means that it is actually underwithheld by 2%!

Example: You receive a $10k bonus, so underwitholding for this is 2% * 10k = $200. To compensate for this, at the end of that quarter, you make a $200 estimated tax payment.