Hi,
Most people who owe money in April were under-withheld all year and had no way of knowing it. Payroll seemingly did its job correctly, the pay stub looked normal, but the shortfall built quietly the whole time.
Withholding gets set once and then never revisited, while everything around it moves. Any of these puts you short:
- Bonuses and RSU vests, withheld at a flat 22% federally no matter what bracket you’re in
- A spouse going back to work, when your W-4 has no idea their income exists
- Consulting income, a K-1, capital gains, interest, or crypto – none of which carry any withholding at all
- A raise or a new job partway through the year
- A brokerage account that had a better year than you planned for
Any one of those leaves you short, and nothing in the system tells you. No advance notice arrives and no changes are made to your withholdings. The first realization most people get is the return itself, months after the last chance to do anything about it.
Have you been underwithholding? There is still a chance to fix, and it comes from a rule almost nobody knows:
Employer withholding is treated as paid evenly across the entire year, regardless of when it actually left your paycheck.
- So, an estimated payment sent in December only covers the fourth quarter.
- However, if you paid the same amount through employer withholding in December, it is counted as though a quarter of it arrived back in April, another in June, another in September.
- It is the only tool in the withholding tax code that reaches backwards!
So the question is just how much withholding you need between now and then. Clear either of these and there’s no penalty at all, regardless of what you end up owing:
- 90% of your actual 2026 tax, or
- 100% of your 2025 tax – 110% if your 2025 AGI was above $150,000
- Miss both and the IRS charges 7%, compounded daily, running from the date each installment was due rather than from April
The second one is the number to aim at, because you already have it. It’s sitting on last year’s return. You don’t have to forecast 2026 to be safe – you only have to beat a figure that’s already been filed.
Reply to this email by Wednesday and we’ll set up a free 15-minute call with our senior tax advisor. Send your most recent pay stub and last year’s return, and we’ll go through where you actually stand for 2026. Do it now and it’s an adjustment. Do it in February and it’s a bill.
Sincerely,
—
George Dimov, CPA
Licensed and Insured
(833) 829-1120 toll free
(212) 994-8081 Fax
www.dimovtax.com