Taxes (Refund, etc.) (pay, account, increase, income)

[txrenter10]

What would prevent you from getting back your entire amount of income tax? I am in Texas, with no state tax, and get about $6,000 taken out of my check under FWH (what does this even stand for?) but last year only got about $800 back. I did some research on it and read some reasons why you wouldn't get the amount back, but isn't income tax essentially the government borrowing your money? I did my taxes myself (through Turbo Tax online) and wonder if I'm missing something. I'm single, no dependents, pretty straight-forward. I have a friend who works the same job, same situation (single, no dependents, etc.) and she went to a tax person at H & R Block and got her full amount back. Just wondering what would account for the difference.

Also, even though the tax refund at the beginning of the year is so nice, I read a lot on here about reducing the amount taken out in the first place. How do you even go about doing that? And what are the chances of you having to PAY when tax time comes if you do this?

I'll admit, I'm only 24 and just now getting a hold on things financially- I did it very blindly in the past and want to learn what I can now instead of later.

[Thepreacherswife]

Do more research. FWH is probably an abbreviation for federal withholding, or what your employer takes out of your gross pay and sends to Uncle Sam as a prepayment for your current year's income tax liability. If you have a relatively simple tax picture (no spouse, no itemized deductions, no kids) you can figure out what your annual federal income tax liability should be - there are numerous web calculators out there to help you do this.

If your current withholding is more than your estimated annual liability, you can adjust your withholding by giving your employer a new form W-4 (talk to your company's HR department). There are plenty of paycheck calulators out there that will show you how to determine the number of exemptions you need to have a given amount withheld from your paycheck. It's OK to owe a small amount at tax time, but if you don't have a certain amount already withheld or otherwise paid in by then (generally the lesser of 90% of your current year liability or 100% of your previous year liability), you could be subject to a penalty for underpayment of estimated tax.

As far as your friend's taxes, who knows? You might be comapring apples and oranges - she might have some deductions that you don't have, or someone might have screwed up. But if your doing your taxes yourself, it's probably a pretty good idea to make sure you understand all the calculations and do a couple of sanity checks before filing .

[VJP]

I think you might be mistaken about what your liabilities are. If you have $6000 withheld and you received an $800 dollar refund, your income tax liability (bill, how much you owe to the feds) was somewhere near $5400 put simplistically. The income tax is the government compelling you by law to pay them money so they can spend it - idealistically in ways that reflect the views of your elected representatives. I suggest you hit up wikipedia for the 16th amendment. Hit up irs.gov for a withholding calculator - you might be able to increase your allowances slightly.

[MrRational]

Originally Posted by Thepreacherswife

Do more research.

Start with a copy of your 1040's for the last few years...
and a set of instructions on how to fill them out.

Then read up on each line until you understand what is being asked of you...
and what you have said in response.

[VJP]

And that number is 110% of previous year's liability.

[Mightyqueen801]

Originally Posted by txrenter10

What would prevent you from getting back your entire amount of income tax? I am in Texas, with no state tax, and get about $6,000 taken out of my check under FWH (what does this even stand for?) but last year only got about $800 back. I did some research on it and read some reasons why you wouldn't get the amount back, but isn't income tax essentially the government borrowing your money? I did my taxes myself (through Turbo Tax online) and wonder if I'm missing something. I'm single, no dependents, pretty straight-forward. I have a friend who works the same job, same situation (single, no dependents, etc.) and she went to a tax person at H & R Block and got her full amount back. Just wondering what would account for the difference.

Also, even though the tax refund at the beginning of the year is so nice, I read a lot on here about reducing the amount taken out in the first place. How do you even go about doing that? And what are the chances of you having to PAY when tax time comes if you do this?

I'll admit, I'm only 24 and just now getting a hold on things financially- I did it very blindly in the past and want to learn what I can now instead of later.

I found the bolded part amusing. Borrowing implies something that is to be paid back. The government isn't borrowing.

[Thepreacherswife]

Originally Posted by VJP

And that number is 110% of previous year's liability.

No, it's not:

In general, you may owe the penalty for 2011 if the total of your
withholding and timely estimated tax payments did not equal at least the smaller of:
1. 90% of your 2011 tax, or
2. 100% of your 2010 tax. (Your 2010 tax return must cover a 12-month period.)

The 110% amount applies to high rollers (those with AGI more than $150K).

http://www.irs.gov/pub/irs-pdf/i2210.pdf

[txrenter10]

Originally Posted by Mightyqueen801

I found the bolded part amusing. Borrowing implies something that is to be paid back. The government isn't borrowing.

Funny because I see this posted ALL OVER this forum, which is why I brought it up.

[Lacerta]

Originally Posted by txrenter10

Funny because I see this posted ALL OVER this forum, which is why I brought it up.

You are misunderstanding what people are saying. OVERPAYING your taxes throughout the year in order to get a big refund is loaning the government your money.

Most middle income range people without dependants are going to pay taxes. But if you get a refund, you paid too much, and you gave the government an interest free loan for the year.

If your friend is truly in the same line of work as you, making about the same money, and has the same living situation (own vs rent, no dependants, etc), you either misunderstood them and they just meant that they got back what they expected to get, or the H&R Block person made a mistake, or they are somehow cheating the system. My guess is that either you misunderstood them, or there is something in their life that you don't know, that entitles them to more of a refund, like they have 7 kids that they pay child support for, or something.

[Thepreacherswife]

Originally Posted by Lacerta

You are misunderstanding what people are saying. OVERPAYING your taxes throughout the year in order to get a big refund is loaning the government your money.

Most middle income range people without dependants are going to pay taxes. But if you get a refund, you paid too much, and you gave the government an interest free loan for the year.

If your friend is truly in the same line of work as you, making about the same money, and has the same living situation (own vs rent, no dependants, etc), you either misunderstood them and they just meant that they got back what they expected to get, or the H&R Block person made a mistake, or they are somehow cheating the system. My guess is that either you misunderstood them, or there is something in their life that you don't know, that entitles them to more of a refund, like they have 7 kids that they pay child support for, or something.

Except child support payments aren't deductible...