difference in taxed amounts

[happyscooter]

Can someone explain what the difference is in the 2 amounts that you have to report on your taxes? One is earned income and I don't know the other one.

I messed up last year and we owed the IRS money. I thought DH's income and our earned interest, plus FIL's IRA was all rolled together.  I added all of them up and thought we had enough to benefit and not pay.   Then I took off for our health insurance, IRAs, charity donations, etc... I wasn't able to claim some of those because our income wasn't high enough. 

Help me before the end of the year.

[mwcpa]

IRA's are only deductible to the extent on has "earned" income (or the max). Earned income is net profit from self employment, salaries reported on W-2. Interest and dividends, IRA withdrawals are not earned income.

Let's say... salary is $1,000.00, interest and dividends is $2,000.00 and a distribution from an IRA is $10,000.00. The earned income is only $1,000.00 and that is the maximum IRA deduction allowed... if you deducted more that $1,000.00 it would not be allowed (you should keep track of the excess on form 8606.

[phil5185]

I messed up last year and we owed the IRS money.

LOL - in my world that's backwards. We haven't received a refund in over 20 years, I make certain that we always owe on April 15.  Too me, it seems silly to over-withhold taxes all year and then apply to get your own money refunded later.

[happyscooter]

I can pretty much determine close to the end of the year if we will owe or not and adjust any withholdings.  But last year was different with my FIL's IRAs and other things. 

OK, that helps that I know interest and other line items aren't anything that will help us out.