Federal Tax question

[LAS2AMS]

Like I said....NO deductions. Everything over $20,000 is taxed at 10 percent.

You don’t understand.
1- the flat tax that you’re proposing would drop overall tax revenues significantly;

2- Most wealthy people have some sort of business in which they push many of their personal expenses through. Businesses have to take deductions, they can’t pay taxes on their revenues, and it’s impossible to police. Eventually this income is passed to their personal.

 

[tvguy]

You don’t understand.
1- the flat tax that you’re proposing would drop overall tax revenues significantly;

2- Most wealthy people have some sort of business in which they push many of their personal expenses through. Businesses have to take deductions, they can’t pay taxes on their revenues, and it’s impossible to police. Eventually this income is passed to their personal.

Moot point. Will never happen. But a whole lot of economists think it would generate a whole lot more revenue, but say for political reasons would never happen. And since it is political we can't discuss it on the DIS.

 

[Nebraska_Disney]

I have appreciated all of the discussion. My wife and I are both salaried and make about the same wage. One thing that she gets, is a yearly bonus in which it will be $8,0000-$15,000 depending on the year and paid in a lump sum. They tax the heck out of this, usually she has about 45% taken off before it reaches the bank, I don't know if this is the cause of us having to pay? I get paid 12 times a year and they are all the same amount. She gets 26 checks a year (all the same amount) and the 1 bonus. It is easy for me to budget this amount each month and carry it in my savings (which is what I currently do) but was wondering why it was happening. Again, thanks.

 

[wishuponastar1984]

I have appreciated all of the discussion. My wife and I are both salaried and make about the same wage. One thing that she gets, is a yearly bonus in which it will be $8,0000-$15,000 depending on the year and paid in a lump sum. They tax the heck out of this, usually she has about 45% taken off before it reaches the bank, I don't know if this is the cause of us having to pay? I get paid 12 times a year and they are all the same amount. She gets 26 checks a year (all the same amount) and the 1 bonus. It is easy for me to budget this amount each month and carry it in my savings (which is what I currently do) but was wondering why it was happening. Again, thanks.

What is your opposition to just updating the W-4? You are seriously overthinking this. Withholding is just an estimate. If you know that you are coming up short $75 per month then just adjust the W-4 and be done with it.

 

[LAS2AMS]

I have appreciated all of the discussion. My wife and I are both salaried and make about the same wage. One thing that she gets, is a yearly bonus in which it will be $8,0000-$15,000 depending on the year and paid in a lump sum. They tax the heck out of this, usually she has about 45% taken off before it reaches the bank, I don't know if this is the cause of us having to pay? I get paid 12 times a year and they are all the same amount. She gets 26 checks a year (all the same amount) and the 1 bonus. It is easy for me to budget this amount each month and carry it in my savings (which is what I currently do) but was wondering why it was happening. Again, thanks.

Your paychecks aren’t taxed at the Federal level. Instead, money is withheld toward your annual Federal liability. These withholdings are determined by IRS tables, and take into account your gross pay and the frequency in which you are paid. The reason the withholding on your wife’s bonus check is so high, is because if that one check is for $10K and she’s paid biweekly, the tables assume she’s making $260K/year and sufficient withholdings are made to cover this. Many employers offer the opportunity to adjust exemptions before bonuses are paid out; increasing the number of exemptions will reduce the holdings.

Many people historically got huge refunds. So when the tax code was revised last year, the persons in charge decided it was best to overhaul the withholdings tables so that less money is withheld that before, even adjusting for the changes. The end result is that more people are getting more money per paycheck, and a much smaller refund.

I’m guessing your situation is created by a combination of (a) income earned outside of your places of employment, (b) a large discrepancy in pay between you and your wife and (c) less money being withheld due to the new tables. My best advice is to due a tax projection on yourself. If you did your taxes through TuboTax or something similar, run 2020 numbers in 2019. It will give you a number that’s close, and you can adjust your withholdings (through the w-4) so sufficient $$$ is withheld.