Tax question

[dawson5]

We had almost 6k in 1099's this year. I wish they would just tax the bonuses throughout the year but it's an outside company that they come from and they don't take taxes out. At one point DH was sharing some of the bonuses with other managers until I told him to stop that they needed to be set up to get their own because they were basically getting tax free money and we were footing the tax bill. He said that he accounted for that by not splitting it evenly to account for the taxes but I told him it didn't matter because it wasn't going on their income for the year, it was all going on ours. Now everyone is set up to get their own checks and fool with their taxes.

Same deal, outside company giving the money. He hands out to the techs, he would have to ask for about 25-30 forms. He said it just doesn't seem like a "bonus" if they are being taxed on it. He explained to the tax lady, this was her suggestion and he does it. I don't think it's in the $6K range though, more like $2K. It all adds up though.

 

[matdrew]

we get a huge amount back also. Last year it was $15,000
I am not postive how and why. We just bring the accountant all our paperwork and answer his questions.

we make about $100,000. we pay alot interest on our mortgage(its a 4 yr old moratgage of $550,000(including first and 2nd mortgage)

We claim less depends on the withoholding then we have. (we know its not smart but we like the chunk of $$ in the end)

Also we withdraw big sums of $ from a seperate 401k when hubby goes on forlough for 3 months (time off ofwork) . These amounts get taxed I guess alot.

We also have a 2 family home not sure how that factors in and a failing real estate buisness which is now for sale.

we had a car lease that was $800 per month and that I knew I could deduct since it was used f0r work (real estate)

we have 4 kids.

I think geting back that big amount of money means we are doing something wrong financially. THe right thing to do is get atiny amount and keep yor money in your pocket instead of giving the govt an interest free loan.

That being said we are trying to change this for next year.

 

[kt_mom]

Same deal, outside company giving the money. He hands out to the techs, he would have to ask for about 25-30 forms. He said it just doesn't seem like a "bonus" if they are being taxed on it. He explained to the tax lady, this was her suggestion and he does it. I don't think it's in the $6K range though, more like $2K. It all adds up though.

It does add up. And I told DH that if you were already borderline even a small amount could bump you into another tax bracket and that could cost us quite a bit, whereas they are getting a couple hundred bucks that never hits their bottom line. When the bonuses started getting bigger he took my advice and now everyone gets their own.

We'll probably get back around 2k this year. I think it would have been closer to 3k if it weren't for the untaxed bonuses.

 

[allison443]

It does add up. And I told DH that if you were already borderline even a small amount could bump you into another tax bracket and that could cost us quite a bit, whereas they are getting a couple hundred bucks that never hits their bottom line. When the bonuses started getting bigger he took my advice and now everyone gets their own.

My understanding is that "getting bumped into a higher tax bracket" doesn't usually cost you anything...you don't get taxed at a higher rate on all your income...only the additional income gets taxed at the higher rate. You still get part of that additonal income after you pay taxes on it.

Did I misunderstand what you were saying?

 

[dawson5]

but if you go into a higher tax bracket, don't you sometimes lose deductions?

 

[tzolkin]

We are getting back quite a bit too.... Almost $7000 federal and almost $2000 state. Each is within a few dollars of what we got back last year.

(We know we need to change how much is withheld. I meant to have DH do it last year... )

DH makes about $57K. I do not work. We have 3 kids. We always wind up taking the standard deduction because it's more than what we would itemize.

We are getting back almost 100% of what DH had withheld in federal taxes (our tax winds up being around $100) and about 1/2 of what he paid in state.

I could easily see where their high mortgage interest (they paid almost 1/2 their income in interest last year? ), college tuition, and childcare could add up to more than what we're getting. But I'm not sure if any of those allow you to get more money than you had withheld.

 

[kt_mom]

I could easily see where their high mortgage interest (they paid almost 1/2 their income in interest last year? ), college tuition, and childcare could add up to more than what we're getting. But I'm not sure if any of those allow you to get more money than you had withheld.

They did have a lot of mortage interest, they have a pretty high house payment, but she does get that $2000 a month in the social security benefits for her two kids from her previous marriage. So that pays the house payment every month. That's 24k a year thats not taxable.

 

[ssawka]

As PPs have said, getting a big return is not really a good thing, it means they had too much withheld which basically means they received a negative return on their income since the IRS did not pay interest on the amount withheld, and the dollar value has declined by the rate of inflation.

 

[ceecee]

Why don't you just ask your friends directly and see how they did it?

Good idea! I would think it's from a lot of deductions and having way too much withheld from the payroll. Which is not a good idea even though you get a lot back. At $45,000 you really wouldn't think he would get that much back.

 

[kt_mom]

Good idea! I would think it's from a lot of deductions and having way too much withheld from the payroll. Which is not a good idea even though you get a lot back. At $45,000 you really wouldn't think he would get that much back.

I guess that was the thing, it seems like a lot to be getting back for an income of $45,000.

I was just curious. I've never been in a position to get such a huge amount back so I wasn't sure if it was possible to get back more than you had withheld during the year. Between DH and myself we didn't have that much withheld in 2009 and we make about twice what he does.

 

[loveysbydesign]

My dh is the sole breadwinner/taxpayer in our household and he makes around $54,000 a year. We claim 2 less then we should and we only get back around $3000. We use this for our vacations to WDW and to pay off some bills. We know we should use it all towards bills but our kids will only be little once so we spurge on Disney!