Taxes; what do you do (in the states)

[pyrxtc]

poll coming...

So what do you do during the year ......

Just curious what other people do. I do not want a debate of why you shouldn't let the government sit on your money for a year either please.

 

[Marionnette]

We pay quarterly taxes. There are penalties for overpaying or underpaying by too much. We try to adjust our quarterly payments so that we pay just what we owe. We usually need to pay just a small amount at tax time.

 

[tlbwriter]

We overpay a little. I don't care if it's "giving the government a free loan" - we've had to pay before, and it sucks, and I don't want to do it again! Emotionally, I prefer giving the government their "free loan." But neither do I want to get a huge refund.

 

[leadfootlevi]

I try to break even, but it never seems to work that way. My deductions are at the max and we still usually end up getting $1-2k back each year.

 

[angierae]

My husband is self-employed so we have to fuss with paying both half of Social Security - we try to balance it out by having extra taken out of my checks but it never works. We generally owe, but we try not to!

 

[mrsklamc]

I am being even more careful not to have them owe me a refund because last year several states held them.

 

[Nik's Mom]

We always try to break even. When we lived in California, we always seemed to owe money to the state, but we usually got a small refund from the feds and broke even in the end.

Now that we are in a different state, we usually get a refund.

 

[crisi]

We generally end up paying in, although we try to keep it to a small check. It can be tough, because some years we have a significant chunk of income in capital gains or dividends, and in other years, practically nothing in capital gains or dividends. We've even been caught by penalties because we sold a bunch of stock and had significantly underpaid taxes - then got caught by AMT on top of it.

Back before we have investments to worry about, I'd set it up to get a small refund. It encouraged me to get my taxes filed promptly and made tax time much more enjoyable.

 

[MyDizneyBoyz]

...I'd set it up to get a small refund. It encouraged me to get my taxes filed promptly and made tax time much more enjoyable.

Ditto this! We happily give the Fed/State gov't some of our money to hold for us over the year just to get that little "Yeeha!" bonus at tax time.

 

[juliebean]

We have the correct amount of deductions for my husband's regular paychecks - but then when he gets a big bonus check, his company hold's back about half of it - as if that was what he was getting every paycheck....

We have not figured out how to convince the machines that it needs to look at the overall yearly pay and not that big bonus amount. So, we always end up with a big refund that is actually bonus money he should've gotten six months earlier...

 

[Colleen27]

We overpay a little, beacuse a refund is better than unexpectedly owing in April. With winter being our slow season, a major expense in April when we've been drawing on our savings for living expenses for months and our cushion is at is annual low is something we try to avoid.

 

[PatsMom]

We have the correct amount of deductions for my husband's regular paychecks - but then when he gets a big bonus check, his company hold's back about half of it - as if that was what he was getting every paycheck....

We have not figured out how to convince the machines that it needs to look at the overall yearly pay and not that big bonus amount. So, we always end up with a big refund that is actually bonus money he should've gotten six months earlier...

If you know you have way overpaid on the withholdings from his bonus, just increase your number of exemptions to reduce the withholdings from his regular paycheck (or yours) for the rest of the year. You can claim as many exemptions as you want. You just need to be careful about underwithholding penalties if you end up owing a lot. We used to claim about 10 exemptions on my husband's paycheck because of his large alimony deduction.

I try to break even and usually I end up with a small refund or writing a small check.

 

[Karenj2]

I would have liked to have chosen that we have everything perfect so we barely get anything back (or pay anything), but I had to choose "other" because our life has been in such change, we usually have no idea what our taxes are going to be until we got to H&R Block. Last year we got a BIG refund, the year before we were close to zero, the year before that we paid. I think this year we'll owe again (DH works gets commission, and he had a good year). BUT, we just had a baby last March, so who knows?!?

 

[dfchelbay]

The reason we ever get anything back is because of our itemizations. We pay a lot in property taxes, vehicle taxes, home office expenses, medical insurance, mortgage interest, etc. We don't get a lot back, but we're not funding a free loan to the government either, so I think our income withhold is where it should be.

 

[DisneyWorld Delight]

We have the correct amount of deductions for my husband's regular paychecks - but then when he gets a big bonus check, his company hold's back about half of it - as if that was what he was getting every paycheck....

We have not figured out how to convince the machines that it needs to look at the overall yearly pay and not that big bonus amount. So, we always end up with a big refund that is actually bonus money he should've gotten six months earlier...

I run payroll for our construction company. We run into this also. What my accountant explained and I now do every bonus check is:

I run regular payroll. Say Joe grossed 450.00 and was taxed fed (12%) $54.00, state taxed (3%) 13.50, and with ss & medicare he nets $352.50.
I write down what percent his is normally taxed at.

Then I add the bonus of $1500.00 to the check. Now Joe is grossing $1,950.00 and I manually change his federal withholding to (12%) $234.00 and the state withholding to (3%) $58.50.

I guess you'd have to see of the payroll manager would be willing to do this.

Long explination short, they just need to figure out normal tax withholding rates and manually change the amount.

 

[juliebean]

If you know you have way overpaid on the withholdings from his bonus, just increase your number of exemptions to reduce the withholdings from his regular paycheck (or yours) for the rest of the year. You can claim as many exemptions as you want. You just need to be careful about underwithholding penalties if you end up owing a lot. We used to claim about 10 exemptions on my husband's paycheck because of his large alimony deduction.

I try to break even and usually I end up with a small refund or writing a small check.

We've already got it up to 8 (there are 5 of us). We talked with someone about this last year in HR, and I guess there is really no amount of exemptions that could correct for it, because for that one paycheck it looks like he makes like $500K a year (he doesn't - the other 23 are normal wages) - so we could claim 15 and it would still take out a big chunk. I was hoping there was some way to say "This is not normal income, please don't tax it at 50%" - but the system doesn't seem to have an option for that.

Thanks for helping to try and figure it out - Plus, I'm always a little scared that perhaps one year he won't get the bonus, so I'm scared to up the deductions too much more. Oh well, I just try and get the taxes done asap and look at as a second bonus - even though it's actually the second half of his bonus.

 

[juliebean]

I run payroll for our construction company. We run into this also. What my accountant explained and I now do every bonus check is:

I run regular payroll. Say Joe grossed 450.00 and was taxed fed (12%) $54.00, state taxed (3%) 13.50, and with ss & medicare he nets $352.50.
I write down what percent his is normally taxed at.

Then I add the bonus of $1500.00 to the check. Now Joe is grossing $1,950.00 and I manually change his federal withholding to (12%) $234.00 and the state withholding to (3%) $58.50.

I guess you'd have to see of the payroll manager would be willing to do this.

Long explination short, they just need to figure out normal tax withholding rates and manually change the amount.

Thanks for the info! I think that's what they should do, but it's not...big company - I don't know if it too much trouble or what. Some of the partners have bigger bonuses than their yearly salaries, so you would think they would've insisted on fixing that problem. I wonder if some of it is political though - not wanting to place an expectation of bonuses into the minds of employees - every year it's always "might not be any this year"...

 

[pyrxtc]

We have the correct amount of deductions for my husband's regular paychecks - but then when he gets a big bonus check, his company hold's back about half of it - as if that was what he was getting every paycheck....

We have not figured out how to convince the machines that it needs to look at the overall yearly pay and not that big bonus amount. So, we always end up with a big refund that is actually bonus money he should've gotten six months earlier...

Bonus checks are always more susceptible to larger taxes than a regular check. My DH's bonus takes about 1/2 too, that's just the way taxes work.

 

[crisi]

Thanks for helping to try and figure it out - Plus, I'm always a little scared that perhaps one year he won't get the bonus, so I'm scared to up the deductions too much more. Oh well, I just try and get the taxes done asap and look at as a second bonus - even though it's actually the second half of his bonus.

That's wise. We've been in that boat as well, where you compensate for the bonus you expect, but don't get.

In my mind, getting money back is better than paying it in for most people. Yeah, its an interest free loan to the government - but most people don't have a lot of money laying around to pay off a surprise tax bill. And it isn't like interest rates are very high right now anyway.

 

[Disnydad]

We aim to owe 0 and get back 0. Does not always work out, but that what we aim for.