Someone talk me off a ledge...

Mustard76 · February 2016

OMG. H went to get our taxes done this morning and we owe the federal government $5200. I'm going to puke! I was expecting a tax bill since we pay every year, but $5200 is outrageous. 2015 is the only year we didn't own a home, so I was expecting an increase, but I seriously can't get over this. We each claim 0 on our W4, but I'm going to have to look at additional voluntary withholding this year. I'll be damned if this happens again next year. Ughhhhh. Happy Friday!

jessica490 · February 2016

Wow, I'm SO sorry! That is beyond crazy! We owed $1750 or so but my dad got it down to $375 so I feel your pain....Hopefully you have a better weekend!

labro · February 2016

Ugh I am so sorry! We owe a bunch this year too and I'm hoping my dad's accountant can help us get the bill down a bit. Maybe you can find some other avenues outside of just additional withholding to help? Pre-tax retirement deductions? Charitible donations? I don't know why but it just seems somehow less painful that having to mark down that extra $100 dollar amount (or whatever it ends up being) on your W-4.

CuriousKiddosMama · February 2016

Holy, I'm sorry! We had that happen to us once when dh was working overseas and his company screwed up his withholding- we ended up owning close to 7k! Is it worth getting a second look, just in case whoever did it today screwed up? I guess the only good news is that you had them done early enough that you have time to get the $ together if you need to since it's more than you though. It really sucks though.

orangehills · February 2016

We're expecting around the same this year as well since we owe some taxes left from selling our house. It's gonna hurt

Here's to hoping 2017 is better!

short+sassy · February 2016

Oh man, that's a lot of money! I'm sorry to hear it.

Unless you all are sure it's right, I agree with @CuriousKiddosMama that you all might want to hire a professional (or a different professional) to look over them.

hoffse · February 2016

That sucks, I'm sorry. The mortgage interest deduction is worth a lot.

I'm not sure if this will make you feel better, but if you can't get that much money pulled together by April 15, you can do an installment agreement with the IRS online. It's pretty self-explanatory. Last time I looked (which was maybe a month ago?) their interest rate was only 3%. It's not ideal of course, but it's much better than putting yourself at risk financially.

julieanne912 · February 2016

That really sucks. I feel your pain... last year (when most of my income was a 1099), my accountant came back to me with a number in the $12,000 range. I pretty much shit my pants....I expected a bill since I hadn't been paying my quarterlies, but not that large. This was when we were starting to wedding plan and I seriously thought we were going to have to cancel the wedding. I worked with him to come up with some more deductions (he was way more conservative than my previous accountant was), and we got the number down in the $9,000 range. Still hurt, but I did have the cash at the time.

I know I'm going to owe again this year and plan on doing the installment agreement hoffse mentioned. It's not the greatest, but again, better than not paying it on time or draining all your accounts to pay it, in my opinion.

MommyLiberty5013 · February 2016

Have you also considered a second set of eyes on your returns? Or, do you feel pretty confident as much as this stinks, that it's correct?

Mustard76 · February 2016

I'm totally going to have someone else look at it. It's our first time with a new person (one of the downsides of moving, we don't have professional relationships here yet.) We have the cash on hand in our liquid savings, it just gives me heartburn to think about paying it. @julieanne912 I would just start to cry at $12k. @orangehills good luck! Thanks, everyone for at least making me feel a little better. It's so far outside of what I was anticipating.

MommyLiberty5013 · February 2016

Mustard76 said:

I'm totally going to have someone else look at it. It's our first time with a new person (one of the downsides of moving, we don't have professional relationships here yet.) We have the cash on hand in our liquid savings, it just gives me heartburn to think about paying it. @julieanne912 I would just start to cry at $12k. @orangehills good luck! Thanks, everyone for at least making me feel a little better. It's so far outside of what I was anticipating.

I would also ask for a detailed print out of the returns and all the figures the person entered. It's possible there's an error or typo.

vlagrl29 · February 2016

What?!??! that's way too much money. The only time I ever owed that much was the year my first husband passed away. Did they tell you why you owe so much? Maybe get a 2nd opinion?

hoffse · February 2016

MommyLiberty5013 said:

Mustard76 said:

I'm totally going to have someone else look at it. It's our first time with a new person (one of the downsides of moving, we don't have professional relationships here yet.) We have the cash on hand in our liquid savings, it just gives me heartburn to think about paying it. @julieanne912 I would just start to cry at $12k. @orangehills good luck! Thanks, everyone for at least making me feel a little better. It's so far outside of what I was anticipating.

I would also ask for a detailed print out of the returns and all the figures the person entered. It's possible there's an error or typo.

This. Happens all the time.

lbonga1 · February 2016

I'm confused about how you owe so much if you're already claiming 0. Isn't the purpose of claiming the right amount of allowances so that you get pretty close to the line of not getting a refund/ not owing?

hoffse · February 2016

lbonga1 said:

I'm confused about how you owe so much if you're already claiming 0. Isn't the purpose of claiming the right amount of allowances so that you get pretty close to the line of not getting a refund/ not owing?

*************************

If both spouses work and make decent incomes, it's very easy to end up in marriage penalty territory. That means that you owe more as a married couple than you would as two singles. More people fall into this than you might realize.

The tax code is set up to provide the highest advantage to married couples with children who have only one spouse that works (or two working spouses with wildly different incomes). There are plenty of families who fall into that model of course, but frankly, it's antiquated for our tax code to be arranged that way. It tends to penalize families who have working women.

Claiming married 0 doesn't mean that you are withholding the right amount. Very roughly speaking, claiming married 0 withholds as though you are married, you are the sole breadwinner of the family, but you don't have any children. In other words, it withholds enough for your spouse's exemption too (because it's married 0), but it doesn't account for the marriage penalty. That's because it makes this calculation based only the income from your paystub. Your payroll person/company has no idea how much your spouse makes, so it assumes your spouse makes nothing.

Now very often this isn't a problem, and two workers can both withhold as married 0 and have it even out with other deductions, etc. But some years it won't be enough.

H withholds as a single, which is withheld at a higher rate, because it is assuming you are unmarried. I claim married 0. I would need to claim single (and we would possibly have to withhold even more than that) if we didn't have a house and couldn't itemize our deductions.

You just have to look at it each year something significant changes - marriage, kids, buying/selling houses, etc. can all throw your taxes way out of whack.

CuriousKiddosMama · February 2016

Thanks @hoffse I've never really understood how that worked either. For us when I'm working I make about 1/3 of what dh does, so I guess it will probably never be an issue.

lbonga1 · February 2016

That's really interesting. Thank you for the information. This is my first year doing taxes by personal taxes by myself, so I've been trying to learn more about it. Last year I realized I had forgotten to change my witholdings, so my kids weren't being included in the equation and my refund ended up being over $6k. But I did successfully file my side business's taxes by myself last year. We have to file as a corporation, so that was definitely new territory for me!

hoffse · February 2016

CuriousKiddosMama said:

Thanks @hoffse I've never really understood how that worked either. For us when I'm working I make about 1/3 of what dh does, so I guess it will probably never be an issue.

It probably won't be, but it just depends on what he makes vs. what you make, and where that lands you when you combine it. I mean, if one spouse is making $80K and the other space is making $20K, then you may avoid the marriage penalty. But if one spouse makes $400K and the other makes $100K, then you are going to be squarely in marriage penalty territory (by huge degrees), even though in both cases spouse 2 is making 25% of what spouse 1 makes.

Obviously the second family can afford to pay a lot more than the first family, so that's not necessarily a problem... but claiming married 0 for family 2 could potentially result in having so little withheld that they would be nailed for statutory penalties in addition to getting a huge tax bill.

Fact is, every family's taxes are going to be different. I personally hate the way the IRS has developed withholdings because the single vs. married 0 vs. married 1, thing makes most people think that their tax situation is going to fall into one of maybe 3 or 4 categories, and that will get them close. There is so much more that goes into it than that.

jtmh2012 · February 2016

hoffse said:

Fact is, every family's taxes are going to be different. I personally hate the way the IRS has developed withholdings because the single vs. married 0 vs. married 1, thing makes most people think that their tax situation is going to fall into one of maybe 3 or 4 categories, and that will get them close. There is so much more that goes into it than that.

The part I hate is that there's no easy way to withhold the proper amount of taxes with both spouses working. But on the same token, it would be hard to beg your employer for a raise when they know what your spouse is making.

As it stands, we went to Married and 0 for both of us after we ended up owing and owing a penalty due to multiple events hitting at once (new job, new kid, etc), but didn't find out we were going to end up owing until almost April because we had to wait for investment forms to come in before we could file. Hoping we can dial that back somewhat this year.

Someone talk me off a ledge...

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