stillmovingforward
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Post by stillmovingforward on Jan 7, 2020 22:41:48 GMT -5
I have a question about what DH and I are doing wrong on our taxes. We both claim 0 dependents. I make around $110,000, he makes around $45,000. We have three dependents. No investments beyond 401(k) or anything exciting like that. WHY do we owe $3,500?! We owed last year also and I thought we had it balanced out correctly. I did get a huge raise this year but shouldn't it all even out? I'm happy being + or - $500 but I just can't seem to get this right. We paid about $15,000 in federal taxes alone this year.
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oped
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Post by oped on Jan 7, 2020 22:47:02 GMT -5
I have a question about what DH and I are doing wrong on our taxes. We both claim 0 dependents. I make around $110,000, he makes around $45,000. We have three dependents. No investments beyond 401(k) or anything exciting like that. WHY do we owe $3,500?! We owed last year also and I thought we had it balanced out correctly. I did get a huge raise this year but shouldn't it all even out? I'm happy being + or - $500 but I just can't seem to get this right. We paid about $15,000 in federal taxes alone this year. 15k on 155k is 10% ... do you standard deduction?
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justme
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Post by justme on Jan 7, 2020 23:13:09 GMT -5
My wild guess is it has something to do with whether you guys put married filing jointly on your w4. It's likely his 45k is being withheld as if you made approximately the same where in reality it needs to withheld at a higher bracket due to your income.
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saveinla
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Post by saveinla on Jan 7, 2020 23:25:52 GMT -5
My wild guess is it has something to do with whether you guys put married filing jointly on your w4. It's likely his 45k is being withheld as if you made approximately the same where in reality it needs to withheld at a higher bracket due to your income. This - you may have to change the withholding to Single instead of Married. You can do this just on yours and see if that works for the next year.
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giramomma
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Post by giramomma on Jan 7, 2020 23:42:46 GMT -5
So. I was playing around with tax brackets. I came up with a about a 15000 tax bill with the following assumptions 1) you took the standard deduction 2) You and your spouse contribute 15% to your retirement accounts..
3) all workplace benefits that come out pre-tax cost you 5K or so. With all of those, you can get your income down to 105K or so. I think I mathed using the brackets properly.
I didn't take the CTC credit into account......assuming your kids are younger than 17, you should have some play there, like 6K of play. If your kids are 17 and older...the break is less significant.
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Deleted
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Post by Deleted on Jan 8, 2020 0:22:06 GMT -5
Do you use the IRS withholding calculator? There are no exemptions anymore and the new W4 reflects that.
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TheOtherMe
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Post by TheOtherMe on Jan 8, 2020 7:47:36 GMT -5
Usually with two incomes, one person needs to claim single on the W-4.
When I worked two jobs, I had to have extra withheld while claiming single or I would owe.
Get a copy of the most current form and complete it with both incomes on one form. Then figure out where you want the withholding to come from.
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wvugurl26
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Post by wvugurl26 on Jan 8, 2020 7:49:24 GMT -5
I have single, 1 exemption. DH either has that or single and 0 exemptions.
I put 10% into retirement and he does 5%. I max my FSA account and my health insurance is expensive.
We got a less than $1,000 refund last year. I think it was $600?
We'd owe big time if we withheld at the married rates.
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Deleted
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Post by Deleted on Jan 8, 2020 7:51:26 GMT -5
My wild guess is it has something to do with whether you guys put married filing jointly on your w4. It's likely his 45k is being withheld as if you made approximately the same where in reality it needs to withheld at a higher bracket due to your income. I agree with this. I don't know what assumptions are built into withholding for Married Filing Jointly but when you add one salary to another the second one gets taxed at much higher rate because the first one has already filled the lower brackets. If you have tax software you can test this by temporarily deleting one of your salaries and seeing what that does to your tax liability as a % of that salary. You may even want to look at Married Filing Separately. It's a bit tricky because each of you has to take at least $12K worth of deductions if you itemize, but the other deductions in your joint names can be allocated in whatever way works for you. (And you should get a more expert opinion- I'm not a tax accountant.) My Ex and I got stuck with this when we married and the effect was worse on the state taxes. We made roughly the same amount and the second salary was all taxed at the highest rate.
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dogmom
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Post by dogmom on Jan 8, 2020 7:57:34 GMT -5
I have single, 1 exemption. DH either has that or single and 0 exemptions. I put 10% into retirement and he does 5%. I max my FSA account and my health insurance is expensive. We got a less than $1,000 refund last year. I think it was $600? We'd owe big time if we withheld at the married rates. DH exemption S-0, mine is M-0. Our "refund" is usually around $400. If we didn't do this, I think it calculated out to us owing around $6K....
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countrygirl2
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Post by countrygirl2 on Jan 8, 2020 8:13:15 GMT -5
When they lowered the tax weekly with their tax cuts didn't they leave the total tax to be paid the same? I think reagon did that too and left people owing a bunch of money at year end. I know hubs used to have a ton of money extra deducted so we didn't owe when we made a lot of money.
You should do 0 exemptions for both then have extra money per week taken out, after knowing what your taxes are divide it by pay periods.
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Cookies Galore
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Post by Cookies Galore on Jan 8, 2020 9:33:47 GMT -5
DH is at S-0 and and I am M-1. In 2018 after the tax cuts, I set my withholdings at M-0 and changed back to M-1 at midyear and we got a $700 refund. Much better than owing $1500 on the same withholding we've been using since we got married in 2013 (I think I always used M-1 and hubs has withheld at the single rate the whole time). I never changed 2019 to M-0 at all, so we'll see how this year's taxes look. I'm okay with owing so long as there aren't three zeros. I'll probably end up changing withholdings to M-0 at some point this year, after raises happen.
ETA: Oh, I think when I looked at the new IRS calculator in 2018 and saw we were going to owe $1500 that made me look closer at hubs' pay stubs and realized his new employer put him at M-0 and not S-0. I think that was the snafu. That said, we'll still see how taxes go this year since I never played with anything in 2019!
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giramomma
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Post by giramomma on Jan 8, 2020 10:38:41 GMT -5
We have four kids, all under 17.
We grossed about 90K, but get our taxable income into the 12% range....effective rate is 0.
We have our withholdings set to 0, an DH has them set to married, take out at the single rate. DH grosses no more than 20K a year ..Between retirement contributions (madetory pension contribution and 457 contribution), FICA, and state taxes, he nets 14K.
For 2017, we had a refund of about 3-4K. In 2018, it was a little over 6K.
We also have SE income, passive income in there as well. I do get a federal tax break for being in school.
I can't imagine that one more child and an extra 60K gross would to lead to a 20K tax difference between the two of us.
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jerseygirl
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Post by jerseygirl on Jan 8, 2020 10:56:11 GMT -5
I also use TurboTax to get estimates for how much I need to send in for quarterly IRS and state taxes I do consulting and this can change dramatically from year to year, also have RMDs for both of us, SS which changes for me since I am still earning from consulting Hoping to stay under the amount that won’t make us pay more for both Medicare payments for us, Medicare payments can go up to very large payments maybe $450 month for each of us, then additional for Part D (prescriptions). Had to pay this 2 years ago. Really adds up since we also pay medigap policies for both of us. It adds up to what working people w/o Medicare pay for medical insurance- but deductions are minimal so that’s good
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Deleted
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Post by Deleted on Jan 8, 2020 10:57:49 GMT -5
We have four kids, all under 17.
We grossed about 90K, but get our taxable income into the 12% range....effective rate is 0.
We have our withholdings set to 0, an DH has them set to married, take out at the single rate. DH grosses no more than 20K a year ..Between retirement contributions (madetory pension contribution and 457 contribution), FICA, and state taxes, he nets 14K.
For 2017, we had a refund of about 3-4K. In 2018, it was a little over 6K.
We also have SE income, passive income in there as well. I do get a federal tax break for being in school.
I can't imagine that one more child and an extra 60K gross would to lead to a 20K tax difference between the two of us. It wouldn't be a 20K difference though unless you paid nothing in all year. And at single 0 you had a lot withheld. I have mine set at single 3 and still had $1000 withheld on 7K taxable income.
Her kids are all college age I believe, so that's just a $500 credit each, so where you got 8K in CTC she got $1500.
If her taxable is really about 105K then her total tax is $14817 minus $1500 in credits.
10% 0f $19400 = $1940 12% of $59550 = $7146 22% of $26050 = $5731
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mcsangel2
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Post by mcsangel2 on Jan 8, 2020 12:41:11 GMT -5
Do you live in a HCOL area? High mortgage? (usually a blue state). The mortgage interest amount that could be claimed was capped when the current administration did their 'tax cuts' last year. It's hurting people in HCOL areas.
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phil5185
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Post by phil5185 on Jan 8, 2020 13:39:40 GMT -5
I have a question about what DH and I are doing wrong on our taxes. We both claim 0 dependents. I make around $110,000, he makes around $45,000. We have three dependents. No investments beyond 401(k) or anything exciting like that. WHY do we owe $3,500?! We owed last year also and I thought we had it balanced out correctly. I did get a huge raise this year but shouldn't it all even out? I'm happy being + or - $500 but I just can't seem to get this right. We paid about $15,000 in federal taxes alone this year. WHY do we owe $3,500? I do that on purpose - ie, owe a few thousand in April. When my tax bill is $15,000, I am in no hurry to prepay it, I pay $11500 in withholding and pay the final $3500 in April. I have an SP500 Index fund that has averaged about 11%/year for decades. So, by leaving that $3500 in my Index for an extra year I earn about $350/yr on average. It is a mystery to me why most people over-withhold all year and then get their extra money 'refunded' to them at year-end. The average refund was almost $3000 in 2017 - lol, WHY do people do that?? On purpose.
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souldoubt
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Post by souldoubt on Jan 8, 2020 14:57:47 GMT -5
I have a question about what DH and I are doing wrong on our taxes. We both claim 0 dependents. I make around $110,000, he makes around $45,000. We have three dependents. No investments beyond 401(k) or anything exciting like that. WHY do we owe $3,500?! We owed last year also and I thought we had it balanced out correctly. I did get a huge raise this year but shouldn't it all even out? I'm happy being + or - $500 but I just can't seem to get this right. We paid about $15,000 in federal taxes alone this year. WHY do we owe $3,500? I do that on purpose - ie, owe a few thousand in April. When my tax bill is $15,000, I am in no hurry to prepay it, I pay $11500 in withholding and pay the final $3500 in April. I have an SP500 Index fund that has averaged about 11%/year for decades. So, by leaving that $3500 in my Index for an extra year I earn about $350/yr on average. It is a mystery to me why most people over-withhold all year and then get their extra money 'refunded' to them at year-end. The average refund was almost $3000 in 2017 - lol, WHY do people do that?? On purpose.
For W2 workers at least at one point it used to be that if you owed over about $1,000 one year you got a notice to update your W4 that stated if you owed over $1,000 the next year there could be penalties. I don't disagree about not wanting a big refund at year-end but I also don't want a big tax bill so I aim to get as close to 0 owed/refunded as possible.
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stillmovingforward
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Post by stillmovingforward on Jan 8, 2020 20:24:22 GMT -5
Thank you everyone! A few clarifications, we owe $3,500 on top of the $15,000 we already paid. Dang. I don't want an amount back but I'd like to not owe so much. I thought we did it right. I'll try changing to a single and see what happens. We live in a HCOL area but we've owned our house a long time so the mortgage is small compared to most.
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stillmovingforward
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Post by stillmovingforward on Jan 8, 2020 20:27:08 GMT -5
Yup, all those kids are over 17.
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jeffreymo
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Post by jeffreymo on Jan 8, 2020 21:40:07 GMT -5
The IRS has an estimator that can help you decide how to complete your W-4 form.
Most important for 2020 is that there is a new W4 form.
It is a completely different form. No more exemptions.
You will need to look at it and all of the worksheets that go with it to be as accurate as possible for 2020.
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Deleted
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Post by Deleted on Jan 8, 2020 22:27:05 GMT -5
A few clarifications, we owe $3,500 on top of the $15,000 we already paid. Dang. Do you not put much into retirement accounts? If so, that could be a good way to cut the tax bill.
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Tiny
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Post by Tiny on Jan 9, 2020 17:53:06 GMT -5
A few clarifications, we owe $3,500 on top of the $15,000 we already paid. Dang. Do you have other streams of income? Did you sell investments or sell a rental property or something? The standard deduction was raised so itemizing property taxes and mortgage interest may no longer be necessary.
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phil5185
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Post by phil5185 on Jan 9, 2020 20:08:53 GMT -5
For W2 workers at least at one point it used to be that if you owed over about $1,000 one year you got a notice to update your W4 that stated if you owed over $1,000 the next year there could be penalties. I don't disagree about not wanting a big refund at year-end but I also don't want a big tax bill so I aim to get as close to 0 owed/refunded as possible.
In general that is correct - except for the part about a notice to update. Google the IRS 'penalty for underpayment of withholding' - Typically, the penalty is 0.5 percent of the amount owed, for each month of nonpayment. Not all underpaying taxpayers face a penalty payment, which may be waived under several scenarios, including: A taxpayers total tax liability is less than $1,000. The IRS section on 'under withholding' is 58 pages long, lol, only the IRS could write something that convoluted.
The good news is - for many years, the 1040 form suggests that you leave the 'penalty' blank and they will bill you later. In recent years, TurboTax calculates it automatically and adds it to you bill. Often there is no bill (the timing of when you were underpaying during the year cancels the penalty). And often the penalty is in the $15 to $25 range. I don't remember ever paying more than $28 over the past 25 years. It is a pretty cheap cost for having use of $2500 to $3500 for an extra 9 or 12 months.
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giramomma
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Post by giramomma on Jan 9, 2020 20:45:34 GMT -5
OK, based on your taxes, I'm guessing you are netting 120K or so...you've got about 40K taxed at 22%. If I add your federal taxes+ fica on 155K, I get about 30K. Which means you must be putting your money in a Roth 401K since you mentioned you do 401ks.
I'd be confused, too, based on what you've posted.
But, rather than sit down with a computer program, I'd try to figure out with paper and pencil. If you don't have a lot in the way of extras, it should be pretty easy to figure out.
We hand our taxes off to someone else, but our taxes are a little more complex (we have 7 sources of income).
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tskeeter
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Post by tskeeter on Jan 10, 2020 11:24:28 GMT -5
I have a question about what DH and I are doing wrong on our taxes. We both claim 0 dependents. I make around $110,000, he makes around $45,000. We have three dependents. No investments beyond 401(k) or anything exciting like that. WHY do we owe $3,500?! We owed last year also and I thought we had it balanced out correctly. I did get a huge raise this year but shouldn't it all even out? I'm happy being + or - $500 but I just can't seem to get this right. We paid about $15,000 in federal taxes alone this year. Getting your tax withholding within $500 on two incomes totaling more than $150K is an ambitious goal. You’re talking about dialing it in to within about three tenths of one percent of your income. To get that close, an estimation tool is unlikely to be adequate. Too many minor factors create error in your estimates. The process I used to refine our tax withholding was to start with the estimates. Then make adjustments over a period of years to get closer. Ultimately, I found that claiming zero dependents plus having an additional $70 or so withheld from each pay check was as close as I could get. Even so, year end bonuses and the like introduced variation that I could never correctly project. As an academic exercise, getting your tax withholding dead on targets is fun. As a real world challenge, as long as you are not paying tax penalties for under withholding, getting your withholding within hand grenade range of your actual tax liability is good enough. If you can’t stand to write a check for a few thousand dollars in April, adjust your withholding so you are slightly over withheld.
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Deleted
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Post by Deleted on Jan 10, 2020 16:04:26 GMT -5
For W2 workers at least at one point it used to be that if you owed over about $1,000 one year you got a notice to update your W4 that stated if you owed over $1,000 the next year there could be penalties. I don't disagree about not wanting a big refund at year-end but I also don't want a big tax bill so I aim to get as close to 0 owed/refunded as possible. To add to what Phil already said on this: there are some "safe harbors"- if, for example, you withheld at least 100% of what you owed the previous year or 90% of what you owed this year. This keeps you from having to pay a penalty for a year with unexpectedly high investment gains or a big bonus. I've gotten hit with underpayment penalties in years when I got big capital gain distributions from mutual funds (typically end of year, and the fund companies are REQUIRED to distribute annually, so no control over them). The penalty amounts have never been anything catastrophic.
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