Tax Witholding

Mustard76 · January 2016

smerka said:

Worth about $275,000. And I get to pay a sales tax of 9.25. Not quite Cook County but my property taxes are higher. BUT IL income tax is only 3.75% which is relatively low compared to NY or CA

Ohhhhh. So close. Taxes on our home last year were $9200. We just purchased in September for $352k and I know taxes are going up. I live about 45 miles outside of Chgo. ETA because I can't type on my phone. Whomp whomp.

julieanne912 · January 2016

These posts are making me so glad I left IL LOL! We just got our first property tax bill... our house is worth around $450ish, and our new tax bill is just under $2200. I think it's a bit off since it's still a developing neighborhood, but I think we'll end up settling in around $4500 next year, which is what our lender estimated for our escrow... the only other house in the neighborhood that's the same floor plan as ours, but closed in 2014 vs 2015 has an adjusted assessed value of double ours.

Side note though, here in CO they have these "metro districts" where the mill levys can vary wildly. We moved maybe 10 miles from where our old house was, and our house there had taxes of over $3,000... when our house was worth 250-260. I also heard that the neighborhood to the south of our old one (different metro district) had taxes go up 35% this year.

JoanE2012 · January 2016

We pay around $11k in property taxes for a house of about $450k. The houses in the neighborhood on either side of us are $14-16k, so I guess we're not so bad! One of the reasons we chose a cheaper house was property taxes.

smerka · January 2016

us too. We leave a couple hundred feet from the county line and their taxes are another $1,000

BlueBirdMB · January 2016

Wow I thought we had high taxes here in NH. Glad to know I'm in good company. We pay a little less than $7,000 on a house valued at $350,000

Xstatic3333 · January 2016

labro · January 2016

Nest lurker here. I had no idea this board was so active!

I'm really curious about some PP's who stated their SO files as single and 0, or married and 0, or whatever, and you file as something different. Do you mean you entered in different statuses on your W-4 and then filed as say "Married and joint" on your tax return? Is that an issue at all? H and I need to take a serious look at how we're deducting this year. I just entered all of our earnings and deductions into TurboTax and it's telling me we owe $3800....I think this is the first year we've never received a tax return so something is seriously off with our withholdings. We both filled out W-4s as married and 0, but clearly something is off for us to have such a significant bill at the end of the year!

short+sassy · January 2016

labro said:

Nest lurker here. I had no idea this board was so active!

I'm really curious about some PP's who stated their SO files as single and 0, or married and 0, or whatever, and you file as something different. Do you mean you entered in different statuses on your W-4 and then filed as say "Married and joint" on your tax return? Is that an issue at all? H and I need to take a serious look at how we're deducting this year. I just entered all of our earnings and deductions into TurboTax and it's telling me we owe $3800....I think this is the first year we've never received a tax return so something is seriously off with our withholdings. We both filled out W-4s as married and 0, but clearly something is off for us to have such a significant bill at the end of the year!

While I unfortunately can't speak to your primary problem because I just don't know, people can put whatever they want for their withholdings. Those forms are just a guideline to try and help people get to the correct amount for their withholdings.

But, generally speaking, filing 0 means the most amount of money is withheld as compared to income level. Did one or both of your employers screw up and not take out enough? If you haven't already, I'd take a quick look at the IRS table of what should have been withheld and then look at what your all's employer actually withheld.

I still remember a company I worked for, we used an outside payroll service, and the payroll service had screwed up one of our employee's withholdings throughout the year. Because of that, he ended up owing like $1200. Which is a bummer, I get it, but he went crazy pants and wanted the company to pay his tax bill. It was like he had zero understanding that he GOT that $1200. Over the course of the year. At any rate, it was a small company and they suggested he get on a payment plan with the IRS and they would cover the interest charges because it was their vendor's mistake not enough was taken out. That seemed more than reasonable to me, but he still had it in his head that they owed him $1200 (rolling eyes).

labro · January 2016

short+sassy said:
While I unfortunately can't speak to your primary problem because I just don't know, people can put whatever they want for their withholdings. Those forms are just a guideline to try and help people get to the correct amount for their withholdings.
But, generally speaking, filing 0 means the most amount of money is withheld as compared to income level. Did one or both of your employers screw up and not take out enough? If you haven't already, I'd take a quick look at the IRS table of what should have been withheld and then look at what your all's employer actually withheld.
I still remember a company I worked for, we used an outside payroll service, and the payroll service had screwed up one of our employee's withholdings throughout the year. Because of that, he ended up owing like $1200. Which is a bummer, I get it, but he went crazy pants and wanted the company to pay his tax bill. It was like he had zero understanding that he GOT that $1200. Over the course of the year. At any rate, it was a small company and they suggested he get on a payment plan with the IRS and they would cover the interest charges because it was their vendor's mistake not enough was taken out. That seemed more than reasonable to me, but he still had it in his head that they owed him $1200 (rolling eyes).

H makes quite a bit more money than I do so my current running theory (until we speak to an accountant) is that my company withheld at whatever rate my annual income falls in for the married filing joint tax bracket, and H's company is putting his in at the higher married/joint tax bracket. However, when our income gets combined...we're in a higher bracket and it comes out that I haven't withheld enough for the year.

I don't know who we use for payroll....but eesh! I don't think I could ever try and get away with getting THEM to give me the money I received (and now owe back!).

I guess I figured re: W-4s that if you're married, you have to select married as your status, and if you're single, you have to select single as your status, or head of household, or whatever. It surprised me that some people did otherwise. All I know is once H finds out on Monday if he's getting a bonus and/or a raise that it's time for us to re-visit the IRS withholding calculator. I checked it at the beginning of 2015 and I thought we would be fine....but apparently I was off.

jtmh2012 · January 2016

labro said:

how we're deducting this year. I just entered all of our earnings and deductions into TurboTax and it's telling me we owe $3800....I think this is the first year we've never received a tax return so something is seriously off with our withholdings. We both filled out W-4s as married and 0, but clearly something is off for us to have such a significant bill at the end of the year!

Just curious. Do you have any taxable investments?

You may also want to play with this: https://apps.irs.gov/app/withholdingcalculator/

hoffse · January 2016

labro said:

Nest lurker here. I had no idea this board was so active!

I'm really curious about some PP's who stated their SO files as single and 0, or married and 0, or whatever, and you file as something different. Do you mean you entered in different statuses on your W-4 and then filed as say "Married and joint" on your tax return? Is that an issue at all? H and I need to take a serious look at how we're deducting this year. I just entered all of our earnings and deductions into TurboTax and it's telling me we owe $3800....I think this is the first year we've never received a tax return so something is seriously off with our withholdings. We both filled out W-4s as married and 0, but clearly something is off for us to have such a significant bill at the end of the year!

**********STUCK IN BOX**************

Your withholding status on your W4 and your actual filing status on your tax return don't have to match. You and your spouse don't have to have matching W4s either. You guys can withhold however works best for you. My H withholds more than me because my paychecks are split into 26 checks through the year and his are split into 24 checks. Since his checks are naturally a bit bigger than mine, we take the extra taxes from there. No real reason for it, we just like our paychecks to be about equal.

The only time I've ever seen W4 withholdings being an issue is when an employee wants the employer to withhold nothing.

If you both of you work and at least one of you makes a decent income, then Married 0 is probably not going to cut it. The tax rates are most favorable when one spouse works and the other doesn't. If you both work, you can actually be subject to what the tax world calls the "marriage penalty." H and I make within 10K of each other, and we definitely fell into the marriage penalty bracket this year.

One tip since you owe so much - I would take the time to enter all the information into HR block as a back check on TurboTax. Make sure both programs say you owe about the same amount. You can use HR Block's online program and get to the very end before you have to pay for it. My TurboTax software had a glitch in it this year that made it so our tax refund was $1,000 less (related to employer-provided HSA contributions).

Also - welcome to the board! This is a pretty good one

**Not tax/legal advice.

labro · January 2016

@jtmh2012 By taxable investments you're meaning non-tax deferred accounts like bank accounts, investment accounts, etc. Right? If so, yes, we have interest earning bank accounts but the interest last year was minimal. We're talking less than $15 between everything. Anyway, I freaking love the IRS withholding calculator! H has his annual review Monday and once we know the outcome there I'm definitely sitting down with our paystubs and the calculator and playing with numbers. I actually think we won't have the same issue next year since we're both maxing out our 401ks but that remains to be seen....

hoffse · January 2016

labro said:
H makes quite a bit more money than I do so my current running theory (until we speak to an accountant) is that my company withheld at whatever rate my annual income falls in for the married filing joint tax bracket, and H's company is putting his in at the higher married/joint tax bracket. However, when our income gets combined...we're in a higher bracket and it comes out that I haven't withheld enough for the year.

I don't know who we use for payroll....but eesh! I don't think I could ever try and get away with getting THEM to give me the money I received (and now owe back!).

I guess I figured re: W-4s that if you're married, you have to select married as your status, and if you're single, you have to select single as your status, or head of household, or whatever. It surprised me that some people did otherwise. All I know is once H finds out on Monday if he's getting a bonus and/or a raise that it's time for us to re-visit the IRS withholding calculator. I checked it at the beginning of 2015 and I thought we would be fine....but apparently I was off.

Yup, that's almost certainly what happened. That's the marriage penalty at work.

AprilZ81 · January 2016

labro said:

@jtmh2012 By taxable investments you're meaning non-tax deferred accounts like bank accounts, investment accounts, etc. Right? If so, yes, we have interest earning bank accounts but the interest last year was minimal. We're talking less than $15 between everything. Anyway, I freaking love the IRS withholding calculator! H has his annual review Monday and once we know the outcome there I'm definitely sitting down with our paystubs and the calculator and playing with numbers. I actually think we won't have the same issue next year since we're both maxing out our 401ks but that remains to be seen....

Do you own your own home? Pay student loans? Have large medical expenses? Have anythings else that could reduce your tax liability?

You don't have to share, just trying to make sure you haven't missed anything.

labro · January 2016

@hoffse Thank you federal government! Where is this so called married benefit everyone told me about anyway? Bunch of lying liars...

@AprilZ81 Yes to most of those. We make too much money together to deduct our student loans....and we paid them off last year anyway. No major medical expenses. We deducted our mortgage loan interest paid, our property tax, all the big things we could find. The only items I have left to add are vehicle registrations for two cars (I didn't have access to them when I was entering stuff in)....but that'll add up to maybe $200 so it won't be enough to make a difference. I'm hoping consulting with an accountant will help to get our bill down a little bit. It'll be worth it to have a second check anyway and he might have other insights. My dad was all "Just put some more money into your 401k!" and I had to remind him we aren't old enough to do catch up contributions....

jtmh2012 · January 2016

labro said:

@jtmh2012 By taxable investments you're meaning non-tax deferred accounts like bank accounts, investment accounts, etc. Right? If so, yes, we have interest earning bank accounts but the interest last year was minimal. We're talking less than $15 between everything. Anyway, I freaking love the IRS withholding calculator! H has his annual review Monday and once we know the outcome there I'm definitely sitting down with our paystubs and the calculator and playing with numbers. I actually think we won't have the same issue next year since we're both maxing out our 401ks but that remains to be seen....

I was thinking more like general investment accounts that aren't tax sheltered. I have a few non-IRA/401k accounts that when they pay dividends/capital gains it gets reported and affects our taxes.

hoffse · January 2016

labro said:

@hoffse Thank you federal government! Where is this so called married benefit everyone told me about anyway? Bunch of lying liars...

@AprilZ81 Yes to most of those. We make too much money together to deduct our student loans....and we paid them off last year anyway. No major medical expenses. We deducted our mortgage loan interest paid, our property tax, all the big things we could find. The only items I have left to add are vehicle registrations for two cars (I didn't have access to them when I was entering stuff in)....but that'll add up to maybe $200 so it won't be enough to make a difference. I'm hoping consulting with an accountant will help to get our bill down a little bit. It'll be worth it to have a second check anyway and he might have other insights. My dad was all "Just put some more money into your 401k!" and I had to remind him we aren't old enough to do catch up contributions....

1) If you both work, it's all lies

Actually, the feminist part of me gets super ragey about it because it has the effect of penalizing families with working women/moms. There's actually going to come a point where it would save H and I tens of thousands of dollars per year in taxes if we divorced.

2) If you are maxing it out already with pre-tax dollars, there's not much you can do to get your tax bill lower. But FYI, if you guys need to be saving more for retirement past the contribution limit, you might be able to do after-tax contributions up to $53K per year. It depends on your plan:

http://news.morningstar.com/articlenet/article.aspx?id=682209

short+sassy · January 2016

hoffse said:

labro said:

@hoffse Thank you federal government! Where is this so called married benefit everyone told me about anyway? Bunch of lying liars...

@AprilZ81 Yes to most of those. We make too much money together to deduct our student loans....and we paid them off last year anyway. No major medical expenses. We deducted our mortgage loan interest paid, our property tax, all the big things we could find. The only items I have left to add are vehicle registrations for two cars (I didn't have access to them when I was entering stuff in)....but that'll add up to maybe $200 so it won't be enough to make a difference. I'm hoping consulting with an accountant will help to get our bill down a little bit. It'll be worth it to have a second check anyway and he might have other insights. My dad was all "Just put some more money into your 401k!" and I had to remind him we aren't old enough to do catch up contributions....

1) If you both work, it's all lies Actually, the feminist part of me gets super ragey about it because it has the effect of penalizing families with working women/moms. There's actually going to come a point where it would save H and I tens of thousands of dollars per year in taxes if we divorced.

2) If you are maxing it out already with pre-tax dollars, there's not much you can do to get your tax bill lower. But FYI, if you guys need to be saving more for retirement past the contribution limit, you might be able to do after-tax contributions up to $53K per year. It depends on your plan:

http://news.morningstar.com/articlenet/article.aspx?id=682209

Loving the phrase "bunch of lying liars". I'm borrowing it . Alas, it applies to many groups outside of government.

I have never understood why the marriage penalty isn't fixed. In some ways, the government encourages marriage, but then that is a big way it doesn't. And it isn't fair. Or encourages only one spouse to work. From an economics viewpoint, isn't it better when as many adults work as possible? More adults working=more production=more household income=more products/services being purchased=more job opportunities=more adults working...and we're back to the beginning, lol.

labro · January 2016

@hoffse Huh! I need read up on that! We both have a 401k and I opened a Roth IRA in 2015. I'm interested in how you're allowing to contribute $35k in post tax to it when you can only do $5500 post tax to a Roth IRA. I just need to read this article 3 more times and it'll hopefully start to make sense.

hoffse · January 2016

labro said:

@hoffse Huh! I need read up on that! We both have a 401k and I opened a Roth IRA in 2015. I'm interested in how you're allowing to contribute $35k in post tax to it when you can only do $5500 post tax to a Roth IRA. I just need to read this article 3 more times and it'll hopefully start to make sense.

Yeah it depends on what your plan allows. But if your employer has the right kind of 401(k) plan document, this is basically a way to do something called a "Super Roth." You can google that phrase to find more info on it. The plans have to meet certain safe harbor tests for them to qualify under the Code, so not all employers have them. I won't get into the details of it, but you tend to find these plans at companies that employ highly-compensated individuals.

You know, one thing I thought of that might account for your tax bill... did you guys make too much last year to contribute to a Roth IRA directly? There are ways to get around the Roth IRA income limits, but you have to do it right so you don't get dinged at tax time.

labro · January 2016

@hoffse No, we're still under the limit so we can directly contribute to a Roth IRA. Something H should consider doing before April 15th so he can get one in for the year too. I think the problem is two fold - One is what we talked about earlier with the marriage penalty and my tax rate being lower than H's when you look at them separately....and then second is AMT. Which I am trying VERY hard to understand...but yeah. We crossed the line and the government is going for the throat.

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