Help me not owe taxes next year.
January 29, 2007 10:41 PM Subscribe
Help me not owe taxes next year. I thought I had figured out how to not owe taxes, but I was wrong. I thought that if I had 0 allowances I wouldn't owe anything. Why isn't that enough?
Response by poster: This is the first year I've owed when I've claimed 0. ARgh! The only thing that changed is I got married, but I'm still having tax withheld at the higher single level.
posted by disaster77 at 10:45 PM on January 29, 2007
posted by disaster77 at 10:45 PM on January 29, 2007
Do you have other income? Investments? Also, are you filing jointly or singly?
posted by epugachev at 11:07 PM on January 29, 2007
posted by epugachev at 11:07 PM on January 29, 2007
The only thing that changed is I got married, but I'm still having tax withheld at the higher single level.
At what rates does your spouse have tax withheld? If your spouse doesn't have an income, or you're filing separately, this should not happen, unless your employer is withholding the wrong amount. If you're filing jointly and your spouse has an income, you need to look at your spouse's W-4 to see if he is underpaying.
posted by Cricket at 11:19 PM on January 29, 2007
At what rates does your spouse have tax withheld? If your spouse doesn't have an income, or you're filing separately, this should not happen, unless your employer is withholding the wrong amount. If you're filing jointly and your spouse has an income, you need to look at your spouse's W-4 to see if he is underpaying.
posted by Cricket at 11:19 PM on January 29, 2007
Try using a W-4 calculator like this one at paycheckcity.com. After you input your salary and your wife's salary, it can suggest an "additional" amount to be withheld from each paycheck.
posted by saffry at 11:39 PM on January 29, 2007
posted by saffry at 11:39 PM on January 29, 2007
The purpose of IRS publication 919 (pdf) is to help you match your withholding to your tax liability. They suggest you complete worksheets 1 (how much you owe) and 2 (how much you're withholding). Then, if the amount on 2 is less than the amount on 1, you can file a new W-4 and specify an additional amount to be withheld per pay period or decrease your allowances (which you've already done to the limit).
Contained also in this publication are reasons your withholding may not match your liability:
Contained also in this publication are reasons your withholding may not match your liability:
There is a good chance you are not having enough tax withheld if:posted by epugachev at 11:46 PM on January 29, 2007 [1 favorite]
* You have more than one job at a time,
* Your spouse also works,
* You have income not subject to withholding, such as capital gains, rental income, interest, dividends, or
* You owe other taxes such as self-employment tax or household employment taxes.
Definitely check the tax calculator. I claimed 0 allowances at my old job (which I was only at for a year because: carpal tunnel, but that's a different story), same as the job I'd previously had which I'd occupied for four years, and they didn't take the proper taxes out. Pissed me off, too, because I was kind of relying on that money.
If you don't feel comfortable with a tax calculator, pay the $$ to get your taxes done professionally (if you don't already). That way, you know more of what to expect, and can compare that refund (or lack thereof) to future years.
posted by Verdandi at 2:18 AM on January 30, 2007
If you don't feel comfortable with a tax calculator, pay the $$ to get your taxes done professionally (if you don't already). That way, you know more of what to expect, and can compare that refund (or lack thereof) to future years.
posted by Verdandi at 2:18 AM on January 30, 2007
Best answer: The marriage penalty bites hard, particularly if you have a modest invidual income and are entitled to none of the credits and deductions built into the Code to mitigate the penalty, since they all pretty much require home ownership or kids. Withholding schedules just don't accomodate this situation, even with zero allowances. You need additional wittholding or to pay quarterlies.
posted by MattD at 3:54 AM on January 30, 2007
posted by MattD at 3:54 AM on January 30, 2007
That is really weird, I took two allowances and got $1,000 back. (My husband took one and got 3,000).
How are you doing your taxes? It might be worth going to see a real accountant, not a program or HRBlock.
posted by jesirose at 6:45 AM on January 30, 2007
How are you doing your taxes? It might be worth going to see a real accountant, not a program or HRBlock.
posted by jesirose at 6:45 AM on January 30, 2007
Best answer: MattD has it. This is the marriage penalty at work, pure and simple. If you're married with no kids and don't own a house (or otherwise qualify for significant deductions), you get screwed. Full stop.
Mr. somanyamys and I got totally blindsided our first year filing jointly -- we were expecting a hefty refund because we both claimed 0 (and when we both claimed 0 as singles, we both got nice fat checks back). But as you can guess, we ended up owing a significant chunk of change.
Additional withholding is your friend, especially if you have no kid/homeowner deductions/credits. If you do have kids/house/significant deductions and are still getting screwed, then you probably need to see a tax professional.
posted by somanyamys at 6:59 AM on January 30, 2007
Mr. somanyamys and I got totally blindsided our first year filing jointly -- we were expecting a hefty refund because we both claimed 0 (and when we both claimed 0 as singles, we both got nice fat checks back). But as you can guess, we ended up owing a significant chunk of change.
Additional withholding is your friend, especially if you have no kid/homeowner deductions/credits. If you do have kids/house/significant deductions and are still getting screwed, then you probably need to see a tax professional.
posted by somanyamys at 6:59 AM on January 30, 2007
In addition to starting a business (best option for above the line deductions in that it lowers your Adjusted Gross Income), another way to not owe taxes next year is to get things on your Schedule A (Itemized Deductions). You can accomplish this several ways:
1) become charitable - donate cash or non-cash items (up to $5000 without an appraisal) - Michigan allows you take some of your deductions on the state return as well - Universities, homeless shelters, public libraries or radio, etc. Massachusett may have something similar.
2) buy a house, have a mortgage on it and pay the property taxes in December (don't wait until they are actually due in Feb)
3) stockpile receipts for items you take to work, lunches you cover for coworkers (as a supervisor), tools and equipment you buy for your job, reference materials
4) take some classes that increase your skills for your current job - deduct tuition, mileage to class, and books & supplies.
5) pay for a safety deposit box
6) any software you purchase to do your taxes (or if you pay someone to prepare them for you)
7) declare your car registration fees and state tax withheld (or paid with estimates).
There are more, you can find them in the instruction manual for the Schedule A and Form 2106 (Employee Business Expenses). Going to see an accountant, a real tax accountant, not H&R Block, at least once will give you a better idea of what you can do. Ask for a quick tax planning meeting in the middle of the year to make sure you are on the right track.
posted by blackkar at 8:07 AM on January 30, 2007
1) become charitable - donate cash or non-cash items (up to $5000 without an appraisal) - Michigan allows you take some of your deductions on the state return as well - Universities, homeless shelters, public libraries or radio, etc. Massachusett may have something similar.
2) buy a house, have a mortgage on it and pay the property taxes in December (don't wait until they are actually due in Feb)
3) stockpile receipts for items you take to work, lunches you cover for coworkers (as a supervisor), tools and equipment you buy for your job, reference materials
4) take some classes that increase your skills for your current job - deduct tuition, mileage to class, and books & supplies.
5) pay for a safety deposit box
6) any software you purchase to do your taxes (or if you pay someone to prepare them for you)
7) declare your car registration fees and state tax withheld (or paid with estimates).
There are more, you can find them in the instruction manual for the Schedule A and Form 2106 (Employee Business Expenses). Going to see an accountant, a real tax accountant, not H&R Block, at least once will give you a better idea of what you can do. Ask for a quick tax planning meeting in the middle of the year to make sure you are on the right track.
posted by blackkar at 8:07 AM on January 30, 2007
Response by poster: Thanks for the info everyone. I had no idea about the marriage penalty. We're planning to buy a house this year or next and no kids are in the plans. We will use a real tax accountant this year.
posted by disaster77 at 8:40 AM on January 30, 2007
posted by disaster77 at 8:40 AM on January 30, 2007
I am clearly no tax expert, but a word of warning. Before the house and kids, and after the marriage, I got hit with this very issue: a $8k tax bill that I eventually had to borrow from my 401(k) to pay. I was using tax software, so I figured I'd check out a "real" tax preparer and have him check it out.
He said "Looks like you owe $8000." So, you might not get much help from that arena.
posted by RikiTikiTavi at 9:32 AM on January 30, 2007
He said "Looks like you owe $8000." So, you might not get much help from that arena.
posted by RikiTikiTavi at 9:32 AM on January 30, 2007
Um, didn't Congress raise the standard deduction for married couples to be twice that of single people? If so, where does the "marriage penalty" come in?
posted by wierdo at 10:36 AM on January 30, 2007
posted by wierdo at 10:36 AM on January 30, 2007
The most likely cause is that you had income other than from your employer. Freelance work doesn't have withholding or Social Security deducted. Neither does investment income.
You can have your employer withhold more than the required amount, so you don't have to come up with cash at filing time. That's probably the best way. Few people can discipline themselves to put away the equivalent of withholding from each freelance or dividend check.
posted by KRS at 12:10 PM on January 30, 2007
You can have your employer withhold more than the required amount, so you don't have to come up with cash at filing time. That's probably the best way. Few people can discipline themselves to put away the equivalent of withholding from each freelance or dividend check.
posted by KRS at 12:10 PM on January 30, 2007
wierdo: It comes in when much of your income is taxed at a higher bracket than it would have been if you'd both filed singly.
posted by ikkyu2 at 12:41 PM on January 30, 2007
posted by ikkyu2 at 12:41 PM on January 30, 2007
ikkyu2: I am clearly missing something about this marriage penalty thing. The first year I was married, my wife and I paid the same taxes jointly as the combined amount we had paid the previous year separately. If filling jointly puts you in a higher tax bracket, why wouldn't you just file separately?
TANGENT: I really don't quite understand why so many people say that an accountant is needed here. The IRS forms really aren't that complicated for the majority of people. If you want some guided advice on the pitfalls and such for various lines/forms, get a book like one from JK Lasser or get one of the more feature filled software tax packages, and toy with the numbers for awhile. It will teach you quite a good deal about how your taxes are actually computed; and perhaps more importantly, will likely teach you things to start doing/not doing in the coming year to reduce your tax burden.
posted by fief at 4:45 PM on January 30, 2007
TANGENT: I really don't quite understand why so many people say that an accountant is needed here. The IRS forms really aren't that complicated for the majority of people. If you want some guided advice on the pitfalls and such for various lines/forms, get a book like one from JK Lasser or get one of the more feature filled software tax packages, and toy with the numbers for awhile. It will teach you quite a good deal about how your taxes are actually computed; and perhaps more importantly, will likely teach you things to start doing/not doing in the coming year to reduce your tax burden.
posted by fief at 4:45 PM on January 30, 2007
If filling jointly puts you in a higher tax bracket, why wouldn't you just file separately?
Married filing separately isn't the same as filing two single tax returns. For one thing, only one of the two folks gets to take certain exemptions, to which they might both otherwise be entitled. It's generally understood that of the three options (single, married joint, married separate), married separate is usually the worst option; it's generally used when spouses are divorcing or otherwise can't come to an agreement about their joint tax situation.
posted by ikkyu2 at 3:34 PM on February 20, 2007
Married filing separately isn't the same as filing two single tax returns. For one thing, only one of the two folks gets to take certain exemptions, to which they might both otherwise be entitled. It's generally understood that of the three options (single, married joint, married separate), married separate is usually the worst option; it's generally used when spouses are divorcing or otherwise can't come to an agreement about their joint tax situation.
posted by ikkyu2 at 3:34 PM on February 20, 2007
This thread is closed to new comments.
I've never had that happen.
Hrm. Maybe you could start a small business and write lots of stuff off?
posted by drstein at 10:42 PM on January 29, 2007