Budget Buster: taxes

[mistysue]

Every Year I get excited to do our taxes. Today I sat down, got everything together and started filling in numbers for H&R block's program.

So throughout the year, I go to the IRS website to check the tax calculator and figure out if our withholdings are looking right. We were on track all year to get about $3,000 REFUND. It kept suggesting I lower our withholdings but I ignored it, thinking it's nice to get a chunk of money sometimes.

As of today, We OWE $2,900! I am so mad that I've even been paying attention, we've done everything the same, we had an additional child last year AND we for the first time owe money?!?
I am going to do my taxes a few different ways to check, but I want to know what tax laws changed so much that changed my budget by $6,000 while I was doing everything right. Just to rub extra salt in there, we are $200 short of being able to deduct all our medical expenses for the year.

So who does/how do you do your taxes who seems to know all the rules about what you can deduct fairly? I really don't feel like I know what I'm doing and I must be doing SOMETHING wrong.

 

[wdwfan16]

The tax withholding tables were altered. When they did this I altered my W4 to have $X more taken out. I hope I got it correct. Way to soon for us to do our taxes.

 

[mistysue]

I actually lowered our exemptions when that happened, so we had more withheld last year than the year before and we had one more dependent for 2009 than for 2008. That is why it's making me mad. I really hope it's just a fluke and that a few weeks from now my numbers will be better.

 

[IDoDis]

Run your tax info through Turbo Tax online.
http://turbotax.intuit.com/
You only have to pay if you file, so you can put in all of the numbers and see what you get. It's impossible to say what you might have done wrong without knowing your information. I can only guess that if not much has changed and you always get a refund of a similar amount then you must have done something wrong.

It's also not wise to give the government your money to hold for you for free. I never understood why people do that? Just a lack of being able to put the money aside themselves, but with the ease of transferring money from one account to another account (savings) by the click of a button, I just don't get why people purposely give themselves less just to get a check back later on.

 

[SandrA9810]

yeah, but sometimes it's nice to be safe than sorry. I'd rather have more taken out, than have to pay at the end of the year.

Plus it's like a bonus for your hard work for the year.

 

[minnie1928]

I ran the calculators because we're getting a refund. According to the calculator, my DH should have his W4 adjusted from 3 allowances to 30!!

 

[Pembo]

For that medical...did you include mileage? $.22/mile from your house to and from every appointment..it helps.

 

[IDoDis]

I ran the withholding calculator on the irs.gov website and we should be getting back $75 dollars. We adjusted our withholding last spring when the govt. changed the withholding on our checks. We just like to break even and prefer to save our money where we earn the interest and don't let the IRS keep our money all year interest free.

Well, we called it just right with us getting back $75.

 

[kydisneyfans]

We claim 18 exemptions for the 3 of us and have a flat rate taken out per pay so we have control over the taxes coming out. The only time more is taken out is a large bonus or tons of overtime. I estimate taxes midyear and adjust as needed. For us to break even with KY, the calculator states 82 exemptions.

I drive over 40,000 miles a year for work and my reimbursement is nearly half the government rate, so a quarter a mile x 40,000=a nice write off. Add mortgage interest, church tithes, IRA contributions, a few weeks of unemployment for each of us, and 2 trips out of state for job interviews, and the refund is looking nice this year.

 

[msmayor]

1) Has your adjusted gross income increased from last year? If so, was it by over $10,000?

2) How does the withholding in 2009 compare to what was withheld in 2008? More or less?

3) Compare your itemized deductions from 2008 to 2009. Have they decreased by a large amount?

4) Did you or your spouse contribute to a 401(k) or other tax-deferred retirement plan in 2008 and lower/eliminate the contribution in 2009?

 

[clh2]

Just to rub extra salt in there, we are $200 short of being able to deduct all our medical expenses for the year.

You never get to deduct all your medical expenses. You can only deduct the medical expenses that are over 7.5% of your adjusted gross income.

I bet a lot of people will get nailed by this this year.

I'm not sure when we will even get my employer's tax forms. THey just ordered the envelope thingy's for the mailing on Friday.

 

[wdwfan16]

OP - Did you income increase above $110,000 AGI? That is where the child tax credit starts to phase out.

 

[Heidijs]

My fiance and I both claim one all year on our exemptions...yet our return is still like $11,000 between the two of us! She told us to raise them more if we wanted to get more during the year but we kind of like getting this huge bonus at the end of the year. It's not that I can't save it myself, but this way I don't even have to think about it...I can't imagine getting an extra $1000 a month. We'd have to both claim like 3 or 4!

 

[mistysue]

Yes, our income went up by about 20%, but we also had about 35% more withheld for the year. It's just so upsetting that things really start to go well, we add another person and our taxes seem to skyrocket.

Knowing the medical deduction is only for the amount over 7.5% makes me feel better. At least we aren't missing much- I thought it meant if we had spent $200 more we could deduct those thousands of dollars- but I'm not going to spend money for the sole purpose of deducting it.

I've had years where my taxes even out but I've found that I just appreciate it more when it comes in a refund for some reason. It's easier for me to turn around and invest it when it's one lump than slowly watching it build.

I'm going to check if it would help to add to our IRA's. I just spent the evening at the grocery store- where I had $44 worth of coupons for an $84 bill (so paid $40 yay!) so at least I feel a little better now.

 

[quentina]

This seems strange to me. Did you double check (possibly put in a decimal or something)?

Hope you figure it all out.

 

[tinatark]

There is a certain point in income where your income increase is eaten up by the additional taxes for the new income bracket. We got there a few years ago. It stunk, because the additional tax negated the salary increase. Because of the nature of our business, we just did more pre-tax free stuff, so the income got back under that bracket.

 

[deva]

Are you getting hit with AMT? I also agree with PP's. When your income goes up you start to "lose" other benefits. Child credits get reduced/eliminated, exemptions get phased out and total itemized deductions are limited (this on top of having to cross a certain threshold to claim them in the first place). Also many more "middle-class" are getting hit with AMT, even after the patch.

 

[Gr8t Fan]

Are you putting in actual social secruity numbers for your dependents?

The reason I ask is because last year I did our taxes online very early in the year, but I was at work and didn't have my kids' SS numbers with me so I put in 123-45-6789 and it showed we owed about $6,700. I'd had a pretty big jump in income so I figured that was the new tax amount and made sure I had the money set aside. Of course, I was in no hurry to write that check so I waited until April 1st and finally pulled out last year's tax return to input the actual SS numbers and the amount due dropped to about $2,700!!! I couldn't believe my eyes.

Maybe it's something as simple as that or an overlooked exemption or deduction?

 

[princessbride6205]

This was probably a freak incident for us, but DH's HR/payroll company messed up DH's withholding all of 2008. We had claimed only 1 on our paychecks, despite the calculators suggesting 4 or 5. We have one job each, home mortgage, dependent child. And we owed $500. Well, the "1" showed on all DH's pay stubs, but the actual dollar amount withheld was low and did not correspond to what a 1 withholding should have been. So my suggestion is to double check the actual withholding for the year.

Good luck!

 

[2littleprincesses]

After reading this thread I am concerned about our withholdings. We did not change our withholdings this year. the calculator says we should be a 8, but my dh is a 4 and I am a 3--yikes. Will we have a huge bill? Any help would be appreciated.

I need to call my employer on Monday and get it fixed. THanks