Am I getting back too much tax refund?

[torinsmom]

With Earned INcome Credit, some people get back a lot more money than what they pay in. Maybe that is what she was talking about? I have known people who didn't even work and got Earned Income Credit money. That would be a kind of gift.

Marsha

 

[disneysteve]

With Earned INcome Credit, some people get back a lot more money than what they pay in. Maybe that is what she was talking about? I have known people who didn't even work and got Earned Income Credit money. That would be a kind of gift.

Got it.

 

[tasha99]

I called it a "gift" because I made about $21,000 last year and paid zero taxes, but I still got a $5500 refund. It's not really a refund since I never gave them the money to begin with, but that's what they call it.

 

[cuterlt]

The IRS has a withholding calculator on its website. My problem always was I had to pay taxes and I wanted to avoid that. This link is pretty helpful.
http://www.irs.gov/individuals/page/0,,id=14806,00.html

 

[MrMarv]

The objective of everyone should be to either get as small of a refund as possible or pay as little as possible.

Anyone who gets refunds of $5,000 or $10,000 on a middle class income is burning money; use the IRS calculators, and adjust your witholdings anytime you buy a house or a car.

After you've 'run the numbers' (six months after you file and adjust your witholding accordingly), that is still much smarter than getting a hefty refund, and as others have said, giving Uncle Sam an interest free loan, which is really insane.

 

[BeckyScott]

I called it a "gift" because I made about $21,000 last year and paid zero taxes, but I still got a $5500 refund. It's not really a refund since I never gave them the money to begin with, but that's what they call it.

Yes, that's what I was talking about in my post! (okay, thank you, I was beginning to think I was crazy) We used to overpay our taxes, plus we got the child tax credit and the EIC. So we changed our withholding, and I was confused because we still got a big refund. And when I looked at it, the amount that we owed and the amount we paid pretty close to matched up. But then when you got a couple lines down and got to write in the Credits, that's where all the money was.

I never did try to get advanced EIC because I was always afraid I'd mess it up and owe them at the end of the year.

 

[Becky2005]

Yes, that's what I was talking about in my post! (okay, thank you, I was beginning to think I was crazy).

I did the same thing the first year we got the EIC. I was baffled how we were having no taxes taken out yet got money back. I didn't think that was possible but sure enough it was the credits. I did read up on it once how it all works but it just got more confusing, so I figured at that point...just send it in & if it's wrong they will audit me. So far, so good. I would be too afraid to take an advancement on EIC too, knowing the way things go we wouldn't qualify for that year or something (I'm not sure how this year will go since there is a different job than last year).

 

[tasha99]

Yes, that's what I was talking about in my post! (okay, thank you, I was beginning to think I was crazy) We used to overpay our taxes, plus we got the child tax credit and the EIC. So we changed our withholding, and I was confused because we still got a big refund. And when I looked at it, the amount that we owed and the amount we paid pretty close to matched up. But then when you got a couple lines down and got to write in the Credits, that's where all the money was.

I never did try to get advanced EIC because I was always afraid I'd mess it up and owe them at the end of the year.

I was a little worried taking the Advanced Earned Income Credit at first because I do payroll at work and I was afraid I'd mess it up (and you wouldn't believe how unsympathetic the IRS is with payroll taxes. I accidentally sent our payroll taxes in to the address on our coupon book rather than depositing them in the bank, and they charged us 10%--even though they had the money in time and it was eventually going to the IRS anyway. I felt lucky my boss was understanding and I still had a job (though he did understand that I was thrown into the office with no training because the previous secretary just quit.)

It is weird getting that big of a "refund" but it's been part of my decision to work part time until my son is older even though I'm a single parent. I figure I could work more hours, get a more middle class income--but then I'd be paying for after school care and much more in taxes. Doesn't make sense to me until he's old enough to be home alone.

 

[solgent]

The objective of everyone should be to either get as small of a refund as possible or pay as little as possible.

Anyone who gets refunds of $5,000 or $10,000 on a middle class income is burning money; use the IRS calculators, and adjust your witholdings anytime you buy a house or a car.

Several years ago, presumably following some changes in the tax laws, we began getting hefty refunds. Less than the amounts mentioned above but in the four figures.

I went to my HR department to adjust our withholding. They advised me that increasing the number of exemptions I was claiming (which already exceeds the number of people in my family) would increase the probability I would be audited.

I am confident that we are paying all that we owe and could "withstand" an audit. However, it would be stressful and take up time. Therefore I decided to leave things alone and we have continued to receive refunds.

I do have the objective of having taxes withheld equal taxes due. I also have the objective of avoiding an audit.

So far the fear is stronger than the desire for interest. But periodically I wonder if they knew what they were talking about and whether even if what they said is true, it would still be worth taking a chance.

 

[Becky2005]

I went to my HR department to adjust our withholding. They advised me that increasing the number of exemptions I was claiming (which already exceeds the number of people in my family) would increase the probability I would be audited.

I think it may send a red flag but doesn't necessarily trigger an audit. In the past DH has claimed something like either 10 or 15 (hence the 0 in taxes) and we STILL got a $4K refund! We are only a family of 6, so definitely more than our family number. I remember being a bit concerned it was so high but he followed a formula & that was the number he got. I can't figure out on how his new job he didn't get the same number since nothing has really changed, so now we get taxes taken out. I'm thinking we will get it all back anyway but we will see how it turns out when we do the taxes next year.

I know I read or heard something about if you took too many it would flag you somehow but when we did it (and for more than 1 year), nothing happened especially since we didn't owe. I think the problem comes in if you owe too much they can penalize you for not having enough taxes taken out or something like that. I thought I read that too somewhere but I forget & don't know if that's true or not. I think that is where the number comes into play.

 

[4eyedbuzzard]

I think the problem comes in if you owe too much they can penalize you for not having enough taxes taken out or something like that. I thought I read that too somewhere but I forget & don't know if that's true or not. I think that is where the number comes into play.

You are correct. If you owe more than $1000 and the amount due is 10% or more of the total tax IRS will expect you to calculate the estimated tax penalty and add it to your payment. Yes, you are responsible for making sure withholding/estimated payment are made during the course of the year. There are exceptions, the most common one being that if you had as much, or more, withheld in the current year as you owed in taxes the previous year no penalty will be applied.

 

[shortbun]

Adjust your taxes, join an open credit union and have that amount taken out of your paychecks and put in an account you do not touch, one that makes a little money for you. I started doing that a few years ago and it's what we use for my husband's retirement each year as he is self-employed. You could use it for anything-making a big purchase, vacation, paying off a credit card. Also, in the beginning of our mortgage, we paid $100+ extra each month. Our 30year mortgage became a 20 year mortgage and we paid loads less interest!!! Our house will be paid off in 2 years!!!! Yay!!!! The accountant says it's time to buy another one-booo!!!!

 

[MrMarv]

Shorthun------BRAVO!!!!!!!

The #1 reason why this nation is drowning in debt is because the overwhelming majority of folks in this country either move too often, or refinance their homes too often.

They don't realize that when you buy a home with a thirty-year mortgage, it will take you approximately twenty-one years to be the proud owner of exactly one-half of your house!!!!

 

[disneysteve]

The #1 reason why this nation is drowning in debt is because the overwhelming majority of folks in this country either move too often, or refinance their homes too often.

Just to clarify, refinancing is only bad if you do it to pull money out of your equity. We've refinanced our home twice but both times we lowered our interest rate and the last time we shortened the loan term. We never took out any equity.

 

[MommyBoo!]

OK, I haven't read this whole thread, just wanted to throw this in. Someone mentioned using the withholding calculator on the irs site. It is a good tool but may not always work for you.

I actually called the irs and talked to a very nice woman who went through the whole thing with me and then changed our withholding based on what we came up with. She told me that sometimes it is better to print out the withholding worksheet and do it by hand and you will get a more accurate result than the online calculator.

I would just call the irs, give them all of your info and they will help you. They are really nice and very helpful.

 

[carrie6466]

. It is a good tool but may not always work for you.

...you will get a more accurate result than the online calculator.

QUOTE]

I have to say just out of curiosity I checked out this online calculator. It said we should change our W-4 to include 25!! allowances.

Umm...I don't think so. We presently have one child under 18, 1 over 18, the 2 of us and our house. Last time we messed with the withholding we ended up paying $2400. We changed it back to what it was originally (I think 3 allowances) and left it that way ever since.

 

[lg3]

I went to my HR department to adjust our withholding. They advised me that increasing the number of exemptions I was claiming (which already exceeds the number of people in my family) would increase the probability I would be audited.

I am confident that we are paying all that we owe and could "withstand" an audit. However, it would be stressful and take up time. Therefore I decided to leave things alone and we have continued to receive refunds.

I do have the objective of having taxes withheld equal taxes due. I also have the objective of avoiding an audit.

So far the fear is stronger than the desire for interest. But periodically I wonder if they knew what they were talking about and whether even if what they said is true, it would still be worth taking a chance.

If you believe that the number of exemptions will potentially trigger an audit, why don't you just have an flat amount withheld in addition (to the number of exemptions you are comfortable with)?

 

[MommyBoo!]

. It is a good tool but may not always work for you.

...you will get a more accurate result than the online calculator.

QUOTE]

I have to say just out of curiosity I checked out this online calculator. It said we should change our W-4 to include 25!! allowances.

Umm...I don't think so. We presently have one child under 18, 1 over 18, the 2 of us and our house. Last time we messed with the withholding we ended up paying $2400. We changed it back to what it was originally (I think 3 allowances) and left it that way ever since.

Yep! That's why I called - I was getting some wacky numbers from the calculator. She told me the worksheet is better than the calculator but they will go through it with you over the phone which is very helpful.

 

[MrMarv]

LG3s suggestion is perfect; even if you start off the year with a certain amout of money being withheld per week, you can always 'run the numbers' later in the year (like now, since the year will be half over this weekend), and tweak either you r number of witholdings in the proper direction, or fill out another W-2 and tell your employer to deduct whatever extra amount you come up with after you've crunched the numbers.

 

[SonicGuy]

My compensation consists mainly of commissions that change from month to month, so I use this website to calculate what my checks will be each month:

http://www.dinkytown.net/java/Payroll.html

It is also a great tool to see what impact a change of deductions can have on an individual paycheck. My checks ALWAYS match to the penny as to what the website calculates for me.