Why do I owe taxes when I claim no exemptions?

Q: My husband and I have no dependents. Our combined income is approximately $110K. We both take 0 for federal payroll deductions. For the past two years we have owed $2,000 and $1,600, respectively. Are we missing something or is owing money every year to be expected? If so, why do we owe taxes when we claim no exemptions? --Mrs. C, Malden

The following answer was provided by Mark Misselbeck, CPA, Levine Katz Nannis & Solomon PC, Needham.

A: When you fill out your W-4, the tables that the employer refers to get the amount to withhold assumes that yours is the only income in the household. Thus, each of you and your husband are treated as having the benefits of the lowest brackets available to you. In fact, the income of one is piled on top of" the income of the other on your joint return, resulting in the income being "pushed up" into higher brackets. Thus, you owe taxes when you file your return. Between you, you and your husband need to estimate the tax you will owe ($ 1,600 is probably close, if that is what you owe on your 2003 return), divide it by 2 (so each absorbs 1/2 of the withholdings), and then divide that amount by the number of pay checks remaining to be collected for the rest of 2004. Then prepare a new Form W-4 for each of your employers, using exactly the same entries as on the original, but asking that that additional amount be withheld, in addition to the table amount. That should get you close to what you will owe next year.