Comment Re:Hubub? (Score 1) 192
It sounds like "zero withholding allowances" is your problem. By default, your company withholds taxes based on what the taxes would be for just your salary. But your actual taxes are based on you and your wife's combined salaries, which pushes you into higher tax brackets. The W4 "extra withholding" is intended to let you increase the withholding to avoid underpayment.
So I suggest you take a look at your last Federal form, and find out the difference between your household's total withholding and what the federal tax tables says your combined salary would owe.. Then you and your wife each file a W4 that sets the extra withholding to half of the shortfall divided by the number of pay periods you have.
You don't have to worry about getting this exactly right: as long as your total withholding is at least 90% of your actual tax liability, there is no penalty.