Can someone please help me with a tax question?

[eeyoresmom]

I am frustrated concerning my federal tax withholding. I know it is much more complicted but I need a very general answer. What % of my adjusted gross pay should I have taken out weekly for federal income taxes? DH and I file jointly and gross about $110,000 per year ( he is self employeed) I don't want to underpay, but I don't want to overpay either since I am trying to pay off my car this year and could use that extra weekly money for that.. ...Thanks for any help/advice.

 

[vicki_c]

There is a calculator for figuring out your withholding allowances on the IRS website. You plug in some info from your past tax return, salary, etc. and it tells you what the right # of allowances are. Much better than generic info from a message board.

http://www.irs.gov/individuals/article/0,,id=96196,00.html

 

[familydisney]

Don't forget you have to account for the other half of the employment tax on your husband since he is self-employed. He should be making quarterly deposits with the IRS on his tax or you could be hit with penalties...

 

[usnuzuloose]

Sometimes it is hard to know, as our income dropped about 1/3 so I know what I have been paying in quarterly is more than it should be. If you have not set yourself up for quarterly payments you may be in for a shock, I would get a tax person to help you set up the plan so you can send in your taxes on the quarterly mark. I know its hard cause you never know what you will make. But I have been paying the same amount for about 5 yrs.

 

[eeyoresmom]

We do pay quarterly estimated taxes and have an accountant, but I don't think he's all that good. DH insists on keeping him though. I personally withhold 25% of my adjusted gross income per check. This is before allowances. Does anyone think this is too much? Like I said, I want to pay off my car this year and could really use this money every week. When there is a refund at the end of the year, it is rolled into household budget expenses. We do keep our money somewhat seperate ( ie. I pay my car, ins., utlities, DH pays motgage etc. )

 

[usnuzuloose]

Is this your first of doing this? The accountant should know how much you need to be paying in. If this is your first yr I would wait and see what taxes are like after filing. We really never see a return on taxes. Sometimes I end up owing a little more. So I would find a different person to get a second opinon. Like I said it is hard to tell you if 25 percent is enough based on your earnings. We have made about 51 thousand this yr. We pay 2100 in fed and around 300 in state tax. These figures are based from our earnings prior as it dropped 1/3 yr and still paying the same amount. Probably will continue to pay that because I have no ideaa what amount we will earn. I would rather overpay a little than be to short and have to come up with more.

 

[msmayor]

We do pay quarterly estimated taxes and have an accountant, but I don't think he's all that good. DH insists on keeping him though. I personally withhold 25% of my adjusted gross income per check. This is before allowances. Does anyone think this is too much? Like I said, I want to pay off my car this year and could really use this money every week. When there is a refund at the end of the year, it is rolled into household budget expenses. We do keep our money somewhat seperate ( ie. I pay my car, ins., utlities, DH pays motgage etc. )

Honestly...you have an accountant. He or she is a far better source to answer this question as they are intimately familiar with your specific tax situation.

No one here knows what deductions or allowances you take and therefore its impossible for anyone to give a reasonable answer to the question "Is this enough?"

 

[usnuzuloose]

I was also going to factor in saying about the amount of write offs you have. I would wait until you file for the yr and go from there. I will tell you if you have paid enough in or not.

 

[eeyoresmom]

This is not the first year. We have been getting refunds of around 3,000 each year, so I know I'm probably not underpaying. The issue is that when the refund arrives it gets rolled into household budget. Also, DH could be underpaying and I may be overpaying. I know that the money comes back to us at the end of the year but I have personal debt ( my car ) that I want to pay off. I don't really want to have a potential arguement with DH (ie. "that was my over payment of taxes so I want some of the refund to pay off my car "). I was just kind of looking for a general % answer, but I can see there probably isn't one. Should DH and I file married but filing seperately. What would be the down side of that?

 

[eeyoresmom]

Honestly...you have an accountant. He or she is a far better source to answer this question as they are intimately familiar with your specific tax situation.

No one here knows what deductions or allowances you take and therefore its impossible for anyone to give a reasonable answer to the question "Is this enough?"

Yes we have an accountant. This was his idea last year: Have DH stop paying estmated quarterly taxes on his business and have all taxes come out of my income! Not every family operates in the "everything in one pot" system. I am responsible for part of the families finances and DH is responsible for the rest.

 

[msmayor]

Yes we have an accountant. This was his idea last year: Have DH stop paying estmated quarterly taxes on his business and have all taxes come out of my income! Not every family operates in the "everything in one pot" system. I am responsible for part of the families finances and DH is responsible for the rest.

Well if you're not happy with your accountant then find a new one. If you feel he's not looking at your situation correctly, you need someone who IS.

While folks here are well-meaning, they really cannot give you accurate advice without knowing your entire situation. In effect, the people here are then no better than your current accountant.

 

[ccgirl]

This is not the first year. We have been getting refunds of around 3,000 each year, so I know I'm probably not underpaying. The issue is that when the refund arrives it gets rolled into household budget. Also, DH could be underpaying and I may be overpaying. I know that the money comes back to us at the end of the year but I have personal debt ( my car ) that I want to pay off. I don't really want to have a potential arguement with DH (ie. "that was my over payment of taxes so I want some of the refund to pay off my car "). I was just kind of looking for a general % answer, but I can see there probably isn't one. Should DH and I file married but filing seperately. What would be the down side of that?

Have you talked to your DH about wanting to take some of the money to pay off your car? That is what I would do. I would also leave your deductions as they are. 3K is not a ton of money in a return and if you decrease your deductions you may end up owing.

 

[sam_gordon]

Looking over my last four paychecks (covering two months), my Federal withholding is averaging about 3.5% of my gross. Now, before you jump and use that...
1) We have a mortgage deduction.
2) We have childcare deduction.
3) We give to charity.

We still usually get ~$1K back in taxes.

What I would do in your situation... look over your last three tax returns. Find your average refund amount. Figure out how much that would be by month. (ex: if you average $3K refund, you could get $250/month more in your check and have $0 owed come tax time). Personally, I like leaving a little slop in there. So I'd try to get $200/month back. Go to HR, they have a chart that should show you how many dependants you should claim on your W4 to get a certain amount back each check.

 

[eeyoresmom]

3.5%? Can that be right? Off the top of my head we have at least that many deductions plus medical, dental......I'm not looking for specific advice, obviously You'd need a lot more detail. I was just wondering what others pay or if there are general broad guidelines. Have my latest pay stub here. Adjusted gross income $889, $170 withheld in Federal.

 

[allyphoe]

Yes we have an accountant. This was his idea last year: Have DH stop paying estmated quarterly taxes on his business and have all taxes come out of my income! Not every family operates in the "everything in one pot" system. I am responsible for part of the families finances and DH is responsible for the rest.

And when you told him "I'd rather have my withholding cover my tax liability, and have DH pay estimates to cover his tax liability; please calculate it that way," he refused to do it?

I've got clients who do things all sorts of ways, including "please tell us how much of the refund belongs to each of us." Paying in safe through withholding is the method that most people find administratively easiest, has the lowest chance for incurring penalties, and results in the lowest tax prep fee (because it involves only a minor calculation on the preparer's part). But if it doesn't work for you, then ask for what does work for you.

There's absolutely no rule of thumb for Federal tax as a percentage of income.

Married filing separate will result in the same total tax liability as joint in the best case scenario, and a significantly higher tax liability in the worst case scenario. Your tax preparer should be able to tell you what the taxes would be either way - if you ask him to.

 

[sam_gordon]

3.5%? Can that be right? Off the top of my head we have at least that many deductions plus medical, dental......I'm not looking for specific advice, obviously You'd need a lot more detail. I was just wondering what others pay or if there are general broad guidelines. Have my latest pay stub here. Adjusted gross income $889, $170 withheld in Federal.

I built a spreadsheet in excel. Cell B3 has my Gross. Cell B4 has my federal withholding. Cell C4 has a calculation of the Fed Witholding (B4) divided by the total of: Gross minus dental insurance, minus health insurance, minus 401K.

Of course, I haven't done my taxes yet, lol, but don't remember changing anything in the last year (aside from getting a substantial raise).

 

[sam_gordon]

3.5%? Can that be right? Off the top of my head we have at least that many deductions plus medical, dental......I'm not looking for specific advice, obviously You'd need a lot more detail. I was just wondering what others pay or if there are general broad guidelines. Have my latest pay stub here. Adjusted gross income $889, $170 withheld in Federal.

You don't say how often you get paid, but I'm going to guess every other week (26 times through the year). You get a $3K refund. That would mean you pay an extra $115 (3000/26) every check. So instead of 170, you could simply pay $55. That's still a 6% tax instead of 20% (the $170).

Again, our child care expenses (three kids, two in daycare) give us a nice deduction.

Personally, I'd talk to your HR and find out how many deductions you need to claim on your W4 so only $100 is withheld. I think that would STILL give you money back.

 

[eeyoresmom]

And when you told him "I'd rather have my withholding cover my tax liability, and have DH pay estimates to cover his tax liability; please calculate it that way," he refused to do it?

I've got clients who do things all sorts of ways, including "please tell us how much of the refund belongs to each of us." Paying in safe through withholding is the method that most people find administratively easiest, has the lowest chance for incurring penalties, and results in the lowest tax prep fee (because it involves only a minor calculation on the preparer's part). But if it doesn't work for you, then ask for what does work for you.

There's absolutely no rule of thumb for Federal tax as a percentage of income.

Married filing separate will result in the same total tax liability as joint in the best case scenario, and a significantly higher tax liability in the worst case scenario. Your tax preparer should be able to tell you what the taxes would be either way - if you ask him to.

Ummm, thank you but I didn't know I could ask for that. I'm a nurse not a tax expert, otherwise I wouldn't be asking for help here Four years ago we ended up owing about 4,000. This accountant told me it was my burden because at the time I was only having about 9% of my gross withheld. He told me I should have at least 20% in just Federal withheld, in fact I think he advised 25%. So that is what I have been doing for the past 4 years. I just figured out I am paying 32% in taxes, which includes state and ss on a salary of 50,000. All I am asking is if this sounds about right. If that can't be answered I am okay with that.

 

[eeyoresmom]

You don't say how often you get paid, but I'm going to guess every other week (26 times through the year). You get a $3K refund. That would mean you pay an extra $115 (3000/26) every check. So instead of 170, you could simply pay $55. That's still a 6% tax instead of 20% (the $170).

Again, our child care expenses (three kids, two in daycare) give us a nice deduction.

Personally, I'd talk to your HR and find out how many deductions you need to claim on your W4 so only $100 is withheld. I think that would STILL give you money back.

Thank you Sam. We don't have an HR department ( too small a company), and I am paid weekly.

 

[pam95]

Ummm, thank you but I didn't know I could ask for that. I'm a nurse not a tax expert, otherwise I wouldn't be asking for help here Four years ago we ended up owing about 4,000. This accountant told me it was my burden because at the time I was only having about 9% of my gross withheld. He told me I should have at least 20% in just Federal withheld, in fact I think he advised 25%. So that is what I have been doing for the past 4 years. I just figured out I am paying 32% in taxes, which includes state and ss on a salary of 50,000. All I am asking is if this sounds about right. If that can't be answered I am okay with that.

If I'm understanding correctly, instead of making quarterly payments, you are having extra money taken out of your paycheck to cover your DH's taxes?

I'd either talk to your accountant, or if you aren't comfortable, get a new accountant. My DH is also self-employed. We pay estimated taxes for him on a quarterly basis. The IRS and other taxing authorities (state and local) send us payment coupons to make these payments. After a few years of having an accountant calculate our estimated taxes for us, I started using TurboTax Home & Business. It also calculates your estimated tax for you. There are different methods (two or three - I know one is based on your previous year's income; that's the method that we use) that you can use to calculate the estimated tax. Anyway, a good accountant would advise you of exactly what you need to do to make payments on a quarterly basis if that's what you'd prefer to do rather than have the extra taken out of your paycheck. If you do switch to the quarterly payment method, you'll have to account for those payments in your budget. I don't know if you'll find that to be any easier than just having the extra taking out of your paycheck or not. I guess it just depends on what works for you.