Taxes; what do you do (in the states)

[PatsMom]

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"...

One of the problems with bonus checks is that they don't apply your normal withholdings to those checks. Tax is withheld at a flat rate for everyone in the company typically. Some peopel wait until bonus time, then estimate their taxes. If enough has been paid in, then increase your exemptions to stop the withholding for the rest of the year. Then reinstate your original withholdings at the first of the next year.

With interest rates right now, letting the government have your money for most of the year is not a big deal if you are going to treat it as a second bonus and spend it. But if you are going to invest it in equities, you would have lost a considerable percentage by not investing earlier this year. And if you use your tax refund to pay off a credit card, reduce a mortgage, etc, then you are paying a higher interest rate for most of the year.

 

[scrapquitler]

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.

We pay quarterly estimated payments, because we own a business. I think the rule is that you have to pay in 110% of what your total taxes were the previous year. The accountant tells us how much to pay, and we pay that. Some years, we get a refund, some years we have to pay.

Back before we had the business, we always tried to pay just enough thru withholding that we didn't have a big bill to pay when we filed our taxes, but we tried very hard not to overpay and get a big refund because we figured we didn't want to do the free loan to the government.

With the current financial state of many states, I wouldn't want to be counting on getting a refund: consider how long people had to wait for their california refunds last year.

 

[Aimeedyan]

We also pay quarterly taxes - it's very important to estimate as close to possible so you're not hit with underpayment penalties (which happened to us one year). Now we have a great accountant that tells us what we need to pay in. We've yet to break even; things tend to change midyear but I have my fingers crossed that this year we are close!

If we were to get a refund, it just gets applied to the April 15 payment. But that hasn't happened yet.

 

[preschoolmom]

Thanks for this post! I pulled out last year's tax return - and then went right to the IRS.Gov web-site, and printed out a new w4 for DH to take to work.

We get an obscenely large tax return - and I'd way rather have that cash flow each month!

This post reminded me to take care of it - Thanks!

 

[Brer Shay]

I'm in Pennsylvania. We have a flat 3.07% that there are almost no exemptions for, so there's not much guesswork.

 

[kydisneyfans]

We also have quite a few itemized expenses. I drive 40K miles a year for work, but only get reimbursed at 2/3 the goverment mileage rate. Add in local taxes, mortgage interest, IRA contributions, 10% charity, storm damage from a lightning strike in June, and it become difficult to gauge the Federal Tax burden yet. On the flip side, to get our KY State Taxes adjusted, we would have to claim 80 exemptions to get it right, so we usually file state taxes in Feb, then use that check to pay what we owe to the Feds.

Breakeven is the goal, money back is the bonus.