Why is Uncle Sam doing this to me?

January 17, 2012 2:48 PM

I have been doing my taxes for myself for a long time; late few years have done Turbo Tax on line. Very simple income, not much in the way of deductions, some 401k contributions thru my employer etc. I have never had to pay Federal Income Taxes albeit the refunds have fluctuationed over the years.

Just did a run through on this years taxes with both Turbo Tax and H&R online apps and I owe close to $4,000 this year!! I am stunned and upset. How could this happen? Nothing much has changed.
Have the tax laws gone haywire this year? I have not read anything that indicats that but how in the world did I go from getting a couple of grand back every year to having to pay 4?
I do not have the money but will figure that part out. Just was wondering WTF?

posted by shaarog to Grab Bag (10 answers total)

Response by poster: * last few years not late.
posted by shaarog at 2:49 PM on January 17, 2012

Probably you made a mistake or your employer did not withhold as much from your pay this year.
posted by michaelh at 2:51 PM on January 17, 2012

If you have multiple years in one of these apps, I'd print the summaries from multiple years and look for where the big changes are happening. That's a good way to see what you've missed or what rules have changed significantly.
posted by michaelh at 2:53 PM on January 17, 2012 [2 favorites]

When I see huge numbers that are likely significantly wrong (i.e. there were no huge tax changes this year, income is similar, and withholdings are in line with last year), its usually something entered in an incorrect box or miscategorization. In New York City we pay city taxes, and incorrectly entering New York City versus NYC in the local tax box caused h&r block to go haywire and assume I had paid no local taxes one year.
posted by jourman2 at 3:07 PM on January 17, 2012 [2 favorites]

did you withdraw from a 401k or anything like that?

go backwards--should be a refund/amount you owe thing in the upper right on turbo tax online. do steps backwards until you see the huge number change in there.
posted by Ironmouth at 3:13 PM on January 17, 2012 [2 favorites]

Do you earn a lot of interest on savings or investments this year? Does the amount your employer withheld from your taxes look approximately the same as previous years? If you can't find the mistake, you'll need to see a tax accountant to get them to help you out.

I owed an unexpected $9000 one year. It turned out it was because I suddenly was employed in a decent paying job, and so the interest on my savings (which back then was earning more than 8%) was no longer tax free. I saw an accountant, and he found weird tax deductions I didn't know about and managed to get it down to about $7000, which helped some.
posted by lollusc at 3:25 PM on January 17, 2012

find a friend that raves about how awesome their CPA is...and then go to that CPA. I learned to trust expert knowledge vs. my own when it came to taxes and i've been very happy. Even if it costs you a few hundred bucks....that is way better than you slugging it out with software on your own and paying Thousands. And if you really do owe thousands you can get some advice about how not to repeat that.
posted by th3ph17 at 4:25 PM on January 17, 2012

I just wanted to offer a minor correction. Unless you have been severely underemployed or have a lot of children you HAVE paid federal taxes every year. Your employer witholds a % of your paycheck for your federal tax payment. That most certainly counts. With regard to why the balance of your payment due (or refund if you have overpaid) has changed this year it must be either error in how you filled the forms, a change in your income or allowable credits/deductions, or a change in how much your employer was witholding.
posted by TestamentToGrace at 5:14 AM on January 18, 2012

Response by poster: Thanks for the suggestions. No huge savings, no 401K withdrawels - all about the same as year after year. I will be going to a professional this year.
As for working backwards, the amount I owe is over 5K to begin with and goes down as I add deductions but never goes below 3800K. Stangely I have had a pay a couple of hundred in state tax for a few years but shows I will be getting $180 back this year.
Thanks for the sanity check!
posted by shaarog at 8:34 AM on January 18, 2012

Yeah, a jump of about $5K (from refund to $4K owed) when you say your income was about the same sorta says to me there was a change or error somewhere. There is almost certainly one figure that has changed a LOT since last year and you need to find it and make sure it's correct. TurboTax has a past-years comparison feature made just for this, but you have to have both sets of taxes fully entered for it to be meaningful.

Paying $5K more suggests something like (assuming a middle-bracket rate of 31%) around $15K more in taxable income. I'd assume you would notice and/or tell us if you were making $15K more.

Have the tax laws gone haywire this year?

There was a stimulus-type temporary tax cut, but it applies to both 2011 and 2012. If anything, the typical taxpayer should owe less.

I do not have the money but will figure that part out.

Assuming your figure holds up and you DO owe that much, you can ask for an automatic installment plan.
posted by dhartung at 12:00 AM on January 19, 2012