Wow! My wife and I owe "a lot" in taxes. What did we do wrong?

You owe because you and your wife didn't have enough taxes withheld from your pay. Visit IRS website www.irs.gov Keyword: Withholding calculator to make changes to your W4,

It is only crazy because you made a mistake on your W4.

Evidently not enough federal has been taken out. I would recommend that you both redo your w-4's and claim 0. If you can afford to do without it I would even have an additional amount taken out of at least one of your checks. Maybe the highest wage earner redoing the w-4 claiming 0 with an additional $100. Depending on your income for 2009 you may not get a refund due to you next year but at least you would have enough federal taken out to not owe any thing.

It's better to owe them than for them to owe you. Did both of you get W-2 or were you independent contractors, meaning what was your working status? That makes a big difference. I've had years where I got W-2 and 1099-MISC because I did independent work too. And yeah it screwed up my taxes big time. Also, look at all your deductions. You might be missing some golden opportunities.

Here is a link that may be helpful: http://finance.yahoo.com/news/Tax-breaks-that-help...

Before changing your w-4 witholdings, I would double check your tax forms to make sure you are taking advantage of any and all deductions and credits. ie if you paid property tax and file a 1040a you can get a higher than stadard deduction. Make sure you take the child tax credit (though yours will be reduced since you make over 110k.) If you should itemize deductions, do it. etc.

If it still comes out that you owe 5k, then go change your w-4.

ask god. :)