Check your taxes!

[The Walk of the Penguin Mich]

Last night, TD was doing a preliminary run through of our taxes.  He has been sending quarterly taxes into the IRS for his stock income, but assumed the taxes paid on his income from his last job (which is the bulk of this year’s income) was correct.

It wasn’t.  It was off by nearly 85%.  I had heard rumors that the employer’s tax tables were under withholding from the new tax laws, so when he asked me to find the error between his projected taxes vs those paid, that was where I looked for the discrepancy.  

He is going to go change his exemptions at his new job on Monday, but that’s not going to be soon enough to deal with this shortage.

We are gonna pay again.

[Deleted]

DS, who's usually pretty good with finances, called me once in a bit of a panic because it turned out that the company had stopped withholding taxes from his income- just about the time he got a raise, so he figured that was the reason for the bump.   HR swore he'd claimed exemption from withholding.  First of all, I know DS- he usually asks me about decisions such as this because he knows I'm pretty smart about finances.  Second, any decent HR department would ask him if he's SURE he's not required to have taxes withheld.

Fortunately, DS was in a pretty low tax bracket so the amount was manageable for him.  I consulted with my brother the hotshot tax accountant who said that DS could probably get underpayment penalties waived by writing a polite letter and explaining the mistake. Don't know if he managed to dodge the penalties- I never asked. 

Another thing to check:  when I was married and living in NJ, the regular withholding tables were way inadequate for two high-income earners.  If they withheld based on what we declared for Federal, we'd owe NJ.  (Briefly- it was because one of our incomes was being taxed totally at NJ's highest marginal rate).  It was always fun to get employers to withhold differently for State and Federal. 

[TheOtherMe]

I did this calculation after the new withholding rates went in to effect.  I would have owed a boatload of money had I not had more withholding from my pension.  I think I am good now. 

[The Walk of the Penguin Mich]

Oct 27, 2018 14:46:56 GMT -5 TheOtherMe said:

I did this calculation after the new withholding rates went in to effect.  I would have owed a boatload of money had I not had more withholding from my pension.  I think I am good now. 

I wonder how many people are going to get hit with this?  

[oped]

It will be after midterms so who will care? 

[TheOtherMe]

Oct 27, 2018 15:12:54 GMT -5 The Walk of the Penguin Mich said:

Oct 27, 2018 14:46:56 GMT -5 TheOtherMe said:

I did this calculation after the new withholding rates went in to effect.  I would have owed a boatload of money had I not had more withholding from my pension.  I think I am good now. 

I wonder how many people are going to get hit with this?  

Lots of people but, as oped said, it will be after the election

[Deleted]

I simply didn't trust Trump.  I'm not politicizing; I just didn't trust the rhetoric.

So I subtracted the tax "savings" and started depositing it in a separate account.  It's with American Express, and I think the interest is 2%.  That's pretty good for a simple savings account.

If we need it, we have it.  I'm not worried about underpayment penalties.  The tax tables came from the IRS.  If they are off, there is going to be some sort of grace offered.  But we want to have the money to easily write the check.

If we don't need it, we have a few more thousand stashed in savings.  

That's as close to a win/win as I ever get.  Lose/lose is more my style.

[justme]

My withholding is down maybe only a little more than what I got refunded last year. And this year the personal exemption is at or higher than my deductions last year. Hoping it evens out but the extra money went into savings anyways so I'm not too worried about it.

[ners]

I think this will be an issue for many people.  I am in payroll.  The IRS agent who did a presentation as a side note said to except more lock in letters for under withholding. 
I did put a notice in our weekly newsletter to check withholdings.  Not sure how many did this or how many will have a surprise when they file their taxes.

[chapeau]

I am throwing the princely sum of $22 extra that I started getting when the tax tables changed into my income tax fund. DH and I both earn self employment income, so we usually owe or receive a tiny refund (we both over withhold to avoid having to pay estimated).
I do my nephew’s taxes. Not looking forward to him owing for the first time. He’s going to be a very unhappy camper. Maybe that will finally get him to vote. He’s 27.

[tallguy]

Oct 27, 2018 17:29:02 GMT -5 justme said:

My withholding is down maybe only a little more than what I got refunded last year. And this year the personal exemption is at or higher than my deductions last year. Hoping it evens out but the extra money went into savings anyways so I'm not too worried about it.

I hope you are talking about the standard deduction.  The personal exemption was eliminated as a way to make the increased standard deduction sound a lot better without actually being a whole lot better.

[Cookies Galore]

We changed our witholdings in April or May, I forget. When did the new tables come out? But yeah, it had us owing over $1500 if we kept things as is. Last year was our first year we were able to itemize and we ended up getting $700 back.
I'll have to check again after paydays this week to see how the estimate looks now.

[Deleted]

Work hung up a flyer on the bulletin board warning everyone to check their withholdings.  Of course that wasn't until September and after bonuses were paid out for the year, so there's not a lot of time left to correct things.  l I doubt most there do as they have no clue how taxes work to begin with. 

[The Walk of the Penguin Mich]

Oct 27, 2018 19:10:50 GMT -5 minnesotapaintlady said:

Work hung up a flyer on the bulletin board warning everyone to check their withholdings.  Of course that wasn't until September and after bonuses were paid out for the year, so there's not a lot of time left to correct things.  l I doubt most there do as they have no clue how taxes work to begin with. 

We figured that if TD changes his W2 and gets $1000/paycheck taken out for the rest of the year, then we should just about be ok.

[justme]

Oct 27, 2018 18:50:11 GMT -5 tallguy said:

Oct 27, 2018 17:29:02 GMT -5 justme said:

My withholding is down maybe only a little more than what I got refunded last year. And this year the personal exemption is at or higher than my deductions last year. Hoping it evens out but the extra money went into savings anyways so I'm not too worried about it.

I hope you are talking about the standard deduction.  The personal exemption was eliminated as a way to make the increased standard deduction sound a lot better without actually being a whole lot better.

Yea. I don't pay attention to all the terms lol.

[bean29]

Oct 27, 2018 13:17:18 GMT -5 The Walk of the Penguin Mich said:

Last night, TD was doing a preliminary run through of our taxes.  He has been sending quarterly taxes into the IRS for his stock income, but assumed the taxes paid on his income from his last job (which is the bulk of this year’s income) was correct.

It wasn’t.  It was off by nearly 85%.  I had heard rumors that the employer’s tax tables were under withholding from the new tax laws, so when he asked me to find the error between his projected taxes vs those paid, that was where I looked for the discrepancy.  

He is going to go change his exemptions at his new job on Monday, but that’s not going to be soon enough to deal with this shortage.

We are gonna pay again.

Try to have an additional amount withheld from is paycheck rather than paying estimated taxes. They take the amount withheld and assume it was paid in equally over the year, so you are less likely yo pay a penalty vs. paying estimates.

[Deleted]

Oct 27, 2018 18:50:11 GMT -5 tallguy said:

The personal exemption was eliminated as a way to make the increased standard deduction sound a lot better without actually being a whole lot better.

I agree. The increased standard deduction did nothing for me because I'm single and have enough deductions to exceed the new standard; loss of the personal exemption is a negative for

[The Walk of the Penguin Mich]

Oct 27, 2018 21:03:59 GMT -5 bean29 said:

Oct 27, 2018 13:17:18 GMT -5 The Walk of the Penguin Mich said:

Last night, TD was doing a preliminary run through of our taxes.  He has been sending quarterly taxes into the IRS for his stock income, but assumed the taxes paid on his income from his last job (which is the bulk of this year’s income) was correct.

It wasn’t.  It was off by nearly 85%.  I had heard rumors that the employer’s tax tables were under withholding from the new tax laws, so when he asked me to find the error between his projected taxes vs those paid, that was where I looked for the discrepancy.  

He is going to go change his exemptions at his new job on Monday, but that’s not going to be soon enough to deal with this shortage.

We are gonna pay again.

Try to have an additional amount withheld from is paycheck rather than paying estimated taxes. They take the amount withheld and assume it was paid in equally over the year, so you are less likely yo pay a penalty vs. paying estimates.

Estimated tax payments is for the money he has made in investments, not his paycheck.  He has the taxes for that income covered, it’s the paycheck that’s deficient.

[tallguy]

Oct 27, 2018 22:05:13 GMT -5 @athena53 said:

Oct 27, 2018 18:50:11 GMT -5 tallguy said:

The personal exemption was eliminated as a way to make the increased standard deduction sound a lot better without actually being a whole lot better.

I agree. The increased standard deduction did nothing for me because I'm single and have enough deductions to exceed the new standard; loss of the personal exemption is a negative for

Me too.  

[finnime]

Aargh. And we live in one of those high tax states that will no longer be a deduction from federal. Double aargh.

[giramomma]

For us, I'm not expecting any issues. We over withhold anyway.

The new tax tables gave me another $40 or so in net income every month. Plus, we have 8K of child tax credits coming our way. Given our income level, I'd be shocked if we went from a 6K refund (last year) to having to pay in to the system. (Though, I suppose, more far fetched things have happened to us).

I'll be getting more alert when they tell me to expect 25% of my expected SS benefit or that I may have to stay on my work sponsored health insurance until I die because they have to make cuts, and SS/medicare got means tested and we're not poor.

[wvugurl26]

I've been paranoid about this. I've run it through the IRS calculator at least twice now. I did it a couple months ago after all salary increases and bonuses for the year were paid. Every time it's showing at least $1k in overpayments. I don't think we are set at standard married withholding though so maybe that's why it's working out for us.

[saveinla]

We both got raises and bonuses last year. As far as I have seen, the taxes withheld are almost the same. I am hoping it will be a wash, but if we have to pay, we will. It's not our first time and it probably won't be the last.

I am also in CA where we are losing a lot of deductions with the new plan, so everything will be new this year anyway.

[countrygirl2]

I'm going to add some but since we pay estimated, not sure where we are anyway.  I am going to hustle and  get the rental property books up to date at year end, getting ready to bring up that last month, so I can throw it all in a table and get an idea and add it to my last estimated payment.  I know SS will be 85% taxable, RMD, not much different, only items is rental property income.

[Blonde Granny]

I don't have enough income to worry about. Much of it is tax free and I only take the standard deduction. What happens, happens.

[msventoux]

The IRS has been making a push to raise awareness of their withholding calculator. The emails to professionals has reached an annoying level. I don’t know what efforts they’ve made to get the info out directly to the general public. We cautioned all of our clients that they should double check their withholdings, but they never listen to us.

[jelloshots4all]

When the tax laws changed, I looked at my take home pay before and after the changes.  The differential I put away for 2018 taxes.  I figured if I was living off the amount prior to the change, I could live off it after and hopefully not have a huge tax bill "surprise".  Or if I did, I had the money to write the check without dipping into savings.

Does anyone have a good tax calculator they like?  I have used a couple different ones, but more doesn't hurt

[Deleted]

Oct 28, 2018 14:12:47 GMT -5 jelloshots4all said:

Does anyone have a good tax calculator they like?  I have used a couple different ones, but more doesn't hurt

I just use the IRS calculator. 

Not that I need any one.  Mine I can just do in my head.  Let's see, taxable should be about 4K, so owe about $400 before any credits and have had $800 withheld year to date.  Yeah...think I'm ok.  

[nittanycheme]

I did ours earlier this year when the new calculator came out, and again recently.  The first time I had to massively change my withholdings.  Because of my mortgage interests, taxes, and other deductions, I had my taxes set up with a couple of exemptions to reduce my withholdings, and come close to even at the end of the year  (married withholding at higher single, but plus 2 exemptions).  As soon as they put in the new tax tables, my withholding went to essentially 0, and I knew that wasn't right.  I think it calculated that I would owe like $10k.  Basically, I had to remove my exemptions, and added a couple of extra $ to my withholding (about 30 or so) to make up for the paycheck or so with no withholding.  I think anyone who used the exemption tactic to accommodate an itemized deduction approach who didn't change their exemptions probably is going to owe a bunch of money.  And I have no idea how it works with kids now.  I think the last time I ran the calculator, it said I would get about $1k back.  That's likely not true since I always forget some small random income - interest, dividends, about 1500 of income from my DH's band....

[Deleted]

I think it will be major fugly for us next year.  We always owe because (1) DH will NOT withhold from his RMD (2) he knows that the withholding on our SS and his pension went down but, again, will not increase the withholding.  I've given up.  At least he allowed part of his 2018 RMD to go as a QCD on the recommendation of his white, male CPA.  Don't get me started.  Only good thing is that our 2019 RMD's will be a whole lot smaller because of the recent market downturn.  

I'm in an investment club partnership where I get a K-1; does anyone know of any changes on that front?