Tax Assistance/Question

tryrrthg

So last year my wife and I only owed $104 in federal taxes. This year it has increased to over $1200. The only real differences between last year and this year are:

Our taxable income increased by just under $7k

mortgage interest decreased by around $1000

property tax increased by about $500.

Everything else pretty much stayed the same. is it possible that my tax burden increased by $1100 because of the added income? Or is it also because of that tax withholding adjustment that the government made last year?

I'm clueless as to why it is such a drastic change... (BTW I use Turbo Tax to do my taxes).

cstmar01

I would go see a CPA if I were you, but all I can think of is that you changed possibly income brackets too. Check to see where you were last year and where you are now and it could have some affect. otherwise IDK.

coolsax

do both you and your wife work? this happened to us this year..almost to the dollar. you have to remember one big thing which while not the whole of your difference is likely a big cause of it. I think, If you both work and are classified as married you double dipped on the making work pay tax credit.. so that a single earner married family wasn't penalized all married people were given the full married credit so if you have 2 wage earners who are full timers you had $800 too little taken out. hence the need to payback that $800 at the end of the year.. some single people who work 2 jobs got hit extra too b/c both jobs would have given the credit _ though it might have been lower for PT jobs I'm not sure. We also went up a tax bracket and my wife didin't get enough taken out of her paycheck so we would have owed a couple hundred anyway but our big difference is this i believe. I knew it would hit us.., but didn't realize my wife wasn't getting enough taken out of her paycheck so it hit harder than i expected.

per previous poster if you're concerned I would check with a CPA as this is just what I think it is.. and i could be wrong.

PhantomOG

that $800 thing was really stupid in my opinion. As if our tax code/withholding wasn't complicated enough already.

shack

You really haven't furnished enough information. You need to compare the amount withheld this year vs last year. How much you owe is not that relevant. Look to see if they witheld less or even the same amount (my guess) in spite of your increasing income. The three figures you mention basically amount to a $7,500 increase in taxable income and $1,200 is 15% of that amount...exactly the amount of the first tax bracket...so my guess is they adjusted your withholding at the first of the year and simply did not withhold enough.

tryrrthg

shack wrote: »

You really haven't furnished enough information. You need to compare the amount withheld this year vs last year. How much you owe is not that relevant. Look to see if they witheld less or even the same amount (my guess) in spite of your increasing income. The three figures you mention basically amount to a $7,500 increase in taxable income and $1,200 is 15% of that amount...exactly the amount of the first tax bracket...so my guess is they adjusted your withholding at the first of the year and simply did not withhold enough.

are you talking box 2 of the W2? I will take a look when I get home. Thanks

shack

tryrrthg wrote:

are you talking box 2 of the W2? I will take a look when I get home. Thanks

Yes or line 64 from your 1040.

tryrrthg

ok, I compared my 2008 return to the 2009. tax withheld on 2008 W2 was about 700 more than 2009. but in 2008 we got the $300 Bush tax rebate check for my son who wasn't born yet when my wife and I got the $1200 rebate check. So that puts 2008 about 1000 more taxes withheld.

In 2009 we got that $800 "credit" or whatever it's called, so my 2008 tax withholdings ended up being about $200 more than 2009. I guess the difference from this year to last year is the extra income that we made and our tax withholdings pretty much staying the same. aka we did not pay enough taxes...

Am I getting this right? Thanks for the help.

shack

tryrrthg wrote: »

ok, I compared my 2008 return to the 2009. tax withheld on 2008 W2 was about 700 more than 2009. but in 2008 we got the $300 Bush tax rebate check for my son who wasn't born yet when my wife and I got the $1200 rebate check. So that puts 2008 about 1000 more taxes withheld.

In 2009 we got that $800 "credit" or whatever it's called, so my 2008 tax withholdings ended up being about $200 more than 2009. I guess the difference from this year to last year is the extra income that we made and our tax withholdings pretty much staying the same. aka we did not pay enough taxes...

Am I getting this right? Thanks for the help.

Yes. You made more money, had fewer deductions and you did not have a proportionate amount of increase in witholdings to cover the taxes owed.

I know last year when I got my first paycheck and noticed that they took out less in taxes even though I got a raise, I immediately called HR and had them change my witholding amount (by using a W-4 form). Since I knew I was going to have to write a fairly large check to cover the previous years taxes, no way I wanted to withhold less. I was already close to having a penalty for underpaying.

tryrrthg

shack wrote: »

Yes. You made more money, had fewer deductions and you did not have a proportionate amount of increase in witholdings to cover the taxes owed.

I know last year when I got my first paycheck and noticed that they took out less in taxes even though I got a raise, I immediately called HR and had them change my witholding amount (by using a W-4 form). Since I knew I was going to have to write a fairly large check to cover the previous years taxes, no way I wanted to withhold less. I was already close to having a penalty for underpaying.

Thanks, it's all making sense now. I still don't like it.

I still have some charitable donations to put in so hopefully that can lesson the blow a bit.

Thanks again for the help.

shack

tryrrthg wrote:

Thanks, it's all making sense now. I still don't like it.

My goal in tax planning is to NEVER get a refund back from the IRS. If that happens it means they have been sitting on MY MONEY all year. My preferrence is to write them a check for $500 or less. Unfortunately, a time or two I has been much larger than that and it is never fun to write a large check to the IRS.

tryrrthg

shack wrote: »

My goal in tax planning is to NEVER get a refund back from the IRS. If that happens it means they have been sitting on MY MONEY all year. My preferrence is to write them a check for $500 or less. Unfortunately, a time or two I has been much larger than that and it is never fun to write a large check to the IRS.

That is the path that I thought I was on, but I didn't pay enough attention to the tax adjustment early last year. Live and learn...

I-SIG

I was fortunate enough to get a raise this year as well and spoke specifically about it with my CPA when we did my 2009 taxes. He gave me some guidance and benchmarks to check every quarter so that I either owe a few hundred (doable) or the .gov owes me a few hundred.

Wes

tryrrthg

I-SIG wrote: »

I was fortunate enough to get a raise this year as well and spoke specifically about it with my CPA when we did my 2009 taxes. He gave me some guidance and benchmarks to check every quarter so that I either owe a few hundred (doable) or the .gov owes me a few hundred.

Wes

I got another pretty nice raise this year so I should probably change my exemptions. although I am having another child later this year so he/she will help on the taxes.