Tax specialists around?

[jIMOh]

Anyone on this board know the basic tax code reasonably well? I am still w*rking and just did turbo tax...

in 2008 our fed refund was $1800+
in 2009 our taxes owed are $2600+

That is a $4400 swing. I changed no allowances, no deductions removed, one credit was added in (stimulus) and still owe.

I use turbo tax. I cannot see my 2009 return until I pay for it, but in the year over year summary I see I paid $4000 less in taxes in 2009 that 2008. I changed NOTHING year over year in allowances. I do not expect such large fluctuations in tax returns year over year ($4000 is 3% of our income, more or less, which to me is a high change in taxes year over year).

I do claim around 14 allowances on my salary which was done to break even in years past (the $1800 refund was because I did not factor child tax credit into withholdings and we would have owed about $200 otherwise). Would the stimulus have reacted to that and withheld $4000 less?

 

[frayne]

What is your filing status, box 1&2 on your W-2s and how many dependents do you have ? The fact that you paid $4000 less in tax in 09 as compared to 08 may be the issue here. Also you may actually want to go see a tax pro, as your 08 return may be incorrect ?

Just my two cents. Most people are clueless when it come to filling out a W-4.

 

[kaneohe]

It might be useful to compare line items in both yrs...e.g. AGI, deductions, taxable income, tax, tax payments/credits, etc to see where the big differences are.

 

[Bikerdude]

It could be AMT kicking in. Just a guess based on the limited info.

 

[jIMOh]

Bikerdude- Turbo tax did an AMT calculation and said I did not need to pay it. I have not seen the 1040 for 2009 because not sure if I want to file with TT or go to HR block for a second opinion.

I do not have many entries on the tax form, only schedule is schedule A for mortgage interest (within $100 of 2008) and property taxes (within $100 of 2008).

Income was within $1000 of previous year (lower in 09)
Taxes paid was $4000 less

I do claim 14 allowances on my income- worked for 2005-2008
something 2009 return did not like those allowances...

I calculated the allowances which withheld what I needed for W-4... if there is another way, feel free to educate me My guess is the stimulus said withhold X less for each allowance.

 

[LOL!]

The stimulus did change amount withheld. If you are married and spouse works that would be a double whammy of less withholding.

 

[Darryl]

Income was within $1000 of previous year (lower in 09)
Taxes paid was $4000 less

Are you telling us you withheld $4000 less in 2009 vs 2008 and now you owe $4400? That is only a $400 swing with a less than $1000 change in income. Seems likely to be accurate (at least as accurate as last year).

I also claim more exemptions than the four of us as payroll dept gets a little excited about that change but I can change my additional withholding online without talking to anybody whenever I want so as I move through the year and see how bonus' and withholding are going and what's happening with DW income and withholding. I can change the additional amount withheld to match up with LY tax + 25-30% for any increase. I look at the real dollars withheld I don't look at one exemption or nine. Additional $5 a week or $400 whatever it takes to end up with close enough to expected tax owed so I don't get forced into doing estimated tax in future years.

 

[jIMOh]

Are you telling us you withheld $4000 less in 2009 vs 2008 and now you owe $4400? That is only a $400 swing with a less than $1000 change in income. Seems likely to be accurate (at least as accurate as last year).

I also claim more exemptions than the four of us as payroll dept gets a little excited about that change but I can change my additional withholding online without talking to anybody whenever I want so as I move through the year and see how bonus' and withholding are going and what's happening with DW income and withholding. I can change the additional amount withheld to match up with LY tax + 25-30% for any increase. I look at the real dollars withheld I don't look at one exemption or nine. Additional $5 a week or $400 whatever it takes to end up with close enough to expected tax owed so I don't get forced into doing estimated tax in future years.

NO either I typed wrong or you misunderstood

2008 refund was about $1800
2009 owe about $2600
that difference is $4400
$4000 less was withheld but I changed NOTHING from 2005 to 2009 and in all other years I received a small refund ($1800 refund in 2008 was due to me not knowing we were eligible for child tax credit with newborn twins).

 

[brewer12345]

Only real way to tell is to compare your returns line by line and thn research what caused the differences.

I've nothing like your stability, so I pretty much never know what my tax return will look like. It looks like I will show a ~40% reduction in W2 income this year vs. last and all of a sudden I go from getting whacked with a high bracket, AMT and ineligibility for the child tax credit, Roth IRA contributions and a slew of other things to a lower bracket and all the goodies the vast majority of Merkins gets. The marginal tax when you move from low 100s income to high 100s is really high.

 

[Buckeye]

Going to HR Block would cost you $150 and probably just confirm what you already know. Go to another free tax website (TaxAct, for example) and see whether you get the same answer.

 

[Bikerdude]

OK, when you say allowances you really mean exemptions. With the tax stimulus average of $7 and change (per week per worker), I would think the number of exemptions probably increased the tax stimulus amount and that is your problem. Still just a guess.

 

[Texas Proud]

OK... let's try and narrow this down...

What was withheld in 2009 was $4K LESS than what was withheld in 2008

And you said you did not change your W-4?


The only thing I can think of is you check with your company... seems they calculated your withholding wrong...

Why did you not see this in your paycheck? I always look at my paycheck from one year to the next in order to see what the differences are... I would have noticed a big increase in take home pay... which is what you seem to have...

 

[FIREd]

I agree with Texas Proud. It sounds like this is a withholding problem. Somebody somewhere changed something. Was your monthly take home pay much higher in 2009 than in 2008 despite the fact that your gross income actually declined a bit?

 

[kaneohe]

Check out the first paragraph here:
The Making Work Pay Tax Credit

There are links to reducing any penalty related to the withholding change that was supposed to take place and also a check on withholding. Sounds like the changes would still be taking place in 2010 so you need to fix the withholding problem if that is the cause. I always found it easier to increase withholding by a fixed $$ amount per paycheck rather than mess around with changing exemptions because then you knew exactly what change would happen.

see also p. 2 here for possibility of waiving any penalty
http://www.irs.gov/pub/irs-pdf/i2210.pdf

 

[target2019]

Warning bells are going off as I read this. It seems possible that 2008 was prepared wrong, and not enough was withheld this year. A couple of things to think about:
1. Withholding exemptions on your W4 are not what goes into 1040. That is where you put your real exemptions. If you put 14 in there last year, and don't have that many legal exemptions, you have a major problem.
2. The withholding tables changed this year. That accounts for some difference between 2008 and 2009.

 

[target2019]

Only real way to tell is to compare your returns line by line and thn research what caused the differences.

I've nothing like your stability, so I pretty much never know what my tax return will look like. It looks like I will show a ~40% reduction in W2 income this year vs. last and all of a sudden I go from getting whacked with a high bracket, AMT and ineligibility for the child tax credit, Roth IRA contributions and a slew of other things to a lower bracket and all the goodies the vast majority of Merkins gets. The marginal tax when you move from low 100s income to high 100s is really high.

Are you self-employed? Maybe some of that income could be broken out into consulting on a 1099 this year.

 

[Martha]

It looks like your withholding got screwed up because of two many exemptions/allowances.

Nevertheless, your total tax burden for the year, all things being equal, should not have increased. It is possible that you are paying a penalty for underwithholding.

 

[brewer12345]

Are you self-employed? Maybe some of that income could be broken out into consulting on a 1099 this year.

Hah, no. DW is self employed, but her net is under 5% of our taxable income. I went from a high paying job in the private sector (with a large amount of pay being variable every year) to a non-private emplyer with a very steady (and lower) salary. Going forward I expect to see much more stability if I do not get fed up and head back to the private sector.

 

[Bikerdude]

If its not too complex you could compare your net pay for each year. If it went up by say $70 a week in 2009 ($3,630 yr) then you withheld too little.

 

[LOL!]

Why not pay $30 for a copy of TT to put on your computer so that you can see what you are doing? You can even use it in November to help do a preliminary run of your 2010 taxes. I don't see a reason to go to H&R block unless you feel you are incompetent.

 

[jIMOh]

OK, when you say allowances you really mean exemptions. With the tax stimulus average of $7 and change (per week per worker), I would think the number of exemptions probably increased the tax stimulus amount and that is your problem. Still just a guess.

exemptions are what you put on tax return
allowances are what you put on w-4 to instruct employer how to withhold taxes

I claimed 14 allowances
I claim only 4 exemptions (self, wife, twin boys)

the difference is that we have about 45k in schedule A deductions (mortgage interest, property taxes) and the allowances were to account for that 45k.

 

[jIMOh]

OK... let's try and narrow this down...

What was withheld in 2009 was $4K LESS than what was withheld in 2008

And you said you did not change your W-4?


The only thing I can think of is you check with your company... seems they calculated your withholding wrong...

Why did you not see this in your paycheck? I always look at my paycheck from one year to the next in order to see what the differences are... I would have noticed a big increase in take home pay... which is what you seem to have...

My wife handles day to day checkbook so she would spot this (my company does not even generate pay stubs anymore).

The stimulus is the reason for the change (making work pay should have paid everyone $800 more in payroll income because of $800 less in taxes taken out.

 

[jIMOh]

Check out the first paragraph here:
The Making Work Pay Tax Credit

There are links to reducing any penalty related to the withholding change that was supposed to take place and also a check on withholding. Sounds like the changes would still be taking place in 2010 so you need to fix the withholding problem if that is the cause. I always found it easier to increase withholding by a fixed $$ amount per paycheck rather than mess around with changing exemptions because then you knew exactly what change would happen.

see also p. 2 here for possibility of waiving any penalty
http://www.irs.gov/pub/irs-pdf/i2210.pdf

good general info
read the first document entirely, it does not specifically show how the credit affects payroll IMO

 

[jIMOh]

Why not pay $30 for a copy of TT to put on your computer so that you can see what you are doing? You can even use it in November to help do a preliminary run of your 2010 taxes. I don't see a reason to go to H&R block unless you feel you are incompetent.

24 hours later I see it was the stimulus which caused the problem. I am now calling it an anti stimulus because now I need to pull $2600 out of my budget to pay this year's taxes, plus $2600 to make sure I break even next year.

When my politicians find out I took $5200 out of the economy, I wonder if they will understand the stimulus better?

 

[Sue J]

If your situation is not too complicated you can use a free estimating tool like the one at H&R Block® - Taxes, FREE Tax Filing, Online Tax Preparation, Tax Software, e-file Taxes

Click Tax Tips and Calculators. Select Filing Status, fill in your age, put in your W2 amount of wages and then click Refund or Owe? Find Out Now and it will take to to a pretty accurate estimator. Follow the steps and at the end you'll get a summary and you can print it out or save it to compare to other estimates.

I work for H&R Block and we use this to help people see what to expect.

Or post your stuff here.

W2 Box 1
W2 Fed Withholding
Interest Income
Number of dependents and their ages
Mortgage Interest
Real Estate Taxes
Education Expenses (1098-T)

Other Income or deductible expenses