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So, I'm getting a big fat refund again I know, I know, gave the gov't a free loan.
I'm trying to figure out what I should do. People say "adjust your exemptions." We are a family of 5, (mom, dad, 3 kids) and both dh and I claim 5. Am I supposed to claim 10 people or something?
I have a p/t retail job, and with claiming 5, they take out 0 in FICA.
My dh gets an annual bonus... which gets taxed 45% His regular paycheck has 5 exemptions on it.
(Befre you give a sarcastic boo-hoo to the bonus, you should know that his employer pays less than the "going rate" for their employees... engineering firm. They use the EOY bonus to make it "even" for their employees. Not our preference, but it is what it is, and is otherwise a good company to work for...)
Those things can't be fixed, as far as I can tell.
*We itemize deductions, and get big deductions for property taxes (TX has high property taxes)
*A big deduction in charitable giving (weekly tithe at church + an assortment of other donations, depending on how well I hold onto reciepts)
*Medical deductions, we usually can't claim, but this year had enough to claim and got a $900 deduction
I think I'd be happy if I could "break even" before deductions as some of them change year to year. (medical, charity)
How do I break even in our W2? Like I say, the only thing I can think of is claim a dozen people, but somehow, that doesn't seem right??
If you anticipate owing the same amount next year you can ask your employer to withhold a set amount each pay period rather than the standard withholding. It is easy for the employer to change however they may be reluctant to do it.
How do I break even in our W2? Like I say, the only thing I can think of is claim a dozen people, but somehow, that doesn't seem right??
You can claim any amount you want, the IRS doesn't care if you lie. The only thing the IRS cares about is getting their money. So as long as you pay up in full EACH QUARTER you are good. Try bumping the exemptions up to 7 and see what that does for you. However, remember, if you do not pay your tax liability in full each quarter you could get hit with a small underpayment penalty come april 15th.
It's the bonus and messes you up. Adjust your withholding for the money in which he gets his bonus, revert back after that and you should be closer to even. We are a family of 5 and DH claims 3 withholdings and that gets us pretty close if we adjust when his bonus comes.
You can get less withheld each paycheck by increasing your exemption past 5.
There's a worksheet on the back of the W-4 that basically says (itemized deductions - additional income) / 3800 = ? and you add that to the 5" on page 1.
So if your sales tax deduction, mortgage interest, and property taxes add up to 11,400 then you divide by 3800 and get 3. So you can write "8" exemptions on your W-4.
I'm not sure about paying "in full" each quarter? I think as long as 90% of your tax liability is paid throughout the year in quarters then you're fine.
You can adjust your W-4 at any time during the year. Just fill out another one and hand it to the payroll office. All they do is key in the # of exemptions into their payroll processing system.
By all means, change the number of your deductions. If you have your taxes done for you that person should be able to quickly figure out the correct number so that you pay in enough but not too much. It took my tax guy about 5 minutes. Then fill out a new W-4 at work.
In my working years I claimed 7 and still got a small refund even though I am single and had no dependents, just lots of deductions.
For some folks, it's a financial disaster to end up owing money you don't have at the end of the year. It's better for them to KNOW they will get a refund. Then at least they have peace of mind.
Most of my income is not taxed up front. And I get it in chunks, not on a monthly basis. And it's always different amounts. Sometimes I do end up owing at the end of the year and who knows if I will get a chunk at the right time to be able to pay. What I tend to do is put aside 30% of everything I do get in a special savings account that's just for taxes. After I file and know the damages, if there's money left over, it becomes part of my vacation fund.
I know this probably isn't the best way to do this but it gives me peace of mind. I don't worry about taxes all the time. I've been in the position of owing money I didn't have and I never want to be there again.
For some folks, it's a financial disaster to end up owing money you don't have at the end of the year. It's better for them to KNOW they will get a refund. Then at least they have peace of mind.
Most of my income is not taxed up front. And I get it in chunks, not on a monthly basis. And it's always different amounts. Sometimes I do end up owing at the end of the year and who knows if I will get a chunk at the right time to be able to pay. What I tend to do is put aside 30% of everything I do get in a special savings account that's just for taxes. After I file and know the damages, if there's money left over, it becomes part of my vacation fund.
I know this probably isn't the best way to do this but it gives me peace of mind. I don't worry about taxes all the time. I've been in the position of owing money I didn't have and I never want to be there again.
I agree....
OP, define "big fat" too, are you talking $500 or $10,000?
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