2017 Tax Season and Return Thread Vol. Tax Podcast Mixed In?

FreshPairs said:
nrg1604 said:
Cause the government take more money from his paycheck throughout the year.
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That still doesnt answer why one owes and the other receives when they both make the same amount
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There's no way to tell for certain without looking at their return. One could have passive income that adds to their AGI and increase their tax obligations, there a lot of different scenarios outside of just their paycheck.
 
FreshPairs said:
How is it my boy gets a refund making $70k+ a year? Arent they in a different tax bracket? Single, no kids and doesnt own a home. I have a coworker same way but ends up owing. Pretty sure both claim 0.
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I don't know his complete details so it's impossible to determine without looking at the actual return, but he's either claiming too many itemizied deduction and thus fudging his return. Or he's considered an independent contractor and actually has that many deductions. Once you start hitting 65k+ you have to choose withholding at 0 as filing single otherwise you will owe. Unless a lot of the earnings were in OT so thus you would be overwithheld.

Taxes are a complex matter in general so each is a case by case basis. The fact that your other friend owes is probably because he setup his withholding as 1 or more.
 
Right into my savings/emergency fund.

Can someone school me on withholding real quick?
 
Halftime said:
Right into my savings/emergency fund.

Can someone school me on withholding real quick?
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nrg1604 covered most of it. But one can look at a "Percentage Method Tables for Income Tax Withholding" and a "Wage Bracket Method Tables for Income Tax Withholding"
~ page 40 here https://www.irs.gov/pub/irs-pdf/p15.pdf

Basically, one would need to know their tax liability for the year. Say you make $26k. For a single person, with personal exempt, and the standard deduction, you would have taxable income of around $16k. Then using the various tax brackets, it would show that you owe $1,800 in taxes for the year.

Now where withholdings come into play is when you look at the Wage Bracket Method Tables for Income Tax Withholding, and say you make $500/ week. With zero allowances, they would take out about $60/week for federal taxes. With a tax liability of $1,800, if the government were to tax you with zero withholding allowances, you are expected to pay $3100 in taxes. That's where a big refund comes into play. You are overpaying by $1300.

If you were to up your allowances to 2, you'd see a decrease in federal withholdings to $37/week. You would be getting $13 more every work week, and have taxes paid in the area of $1900, nearly equal with your liability. Smaller return but more during each and every week.

There's more complications but thats the jist for an average person
 
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LazyJ10 said:
My annual announcement. Strive for little to no return. Big returns generally mean you overpaid throughout the year and left that money on the table (opportunity cost). Obviously if you're prone to spend foolishly, then this forced savings may be best for you.

Carry on...
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Jesus.. glad to know you are alive :smokin
 
Halftime said:
Right into my savings/emergency fund.

Can someone school me on withholding real quick?
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It's basically what rate do you want the government to withdraw from your paycheck based on the allowance you claim on your W-4 and your estimated yearly salary. People who are single should claim lower allowance because they don't have as many deduction as people married with kids, so they usually end up owing more in taxes.

Hypothetical situation:

Two people make 50k a year, one is single and one has two kids.

Single gets to deduct standard deduction and one personal exemption, taxable income of 40K.
Person with two kids get to deduct standard deduction and personal exemptions along two dependents, taxable income is 30k

40k and 30k are in two different tax brackets, single owes 2k in tax and person with two kids owes 500.

For single by claiming 0 as his withholding, the government withdrew more tax from his paycheck so that at the end of the year, the total amount of tax taken from paycheck is 2k so his take home for the year is 38k.

For person with two kids, by claiming 2 as his withholding, the government withdrew less from his paycheck so at the end of the year the total amount to tax taken from paycheck is 500 so his take home for the year is 39.5k.

That was a strictly hypothetical situation and things rarely works out to match perfectly but thats how withholding works.

More often than not single people who claim 0 can end up with a large amount of refund, which just mean the government withdrew more money throughout the year than they needed to.

Think of going into Best Buy with the plan of buying a 10k TV and pre-paying them 700 for taxes. After doing some shopping, you found a 5k TV you like better, go to pay and Best Buy refund you 350 in taxes. That's not really free money, it's your money they were holding on to from you.
 
Halftime said:
Right into my savings/emergency fund.

Can someone school me on withholding real quick?
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Well here's the way it works in general. Lets say you get paid a salary of 70k where you receive a direct deposit 2x per month. So the company who process the payroll for your company they will see you make about 2900 per paycheck. Based on the withholding you choose they automatically withhold a certain amount of money that would technically be your tax due at year end. So if you choose zero it will withholding enough money as if you were filing as single. Now this doesn't take into consideration the fact that you live in a high tax state and city along with maybe many nonreimbursed costs incurred through your job, maybe college tuition, a mortgage, home equity loan, and many other factors when you file and could potentially itemize. It's only taking the standard deduction into consideration. So if you are a normal person this would basically result in either a small amount due or a small amount being refunded.

Now lets say you made the same are still single but choose a withholding of 1. Now you might see an extra 20-30 more per paycheck but the payroll is now withholding as if you were filing as if you were married or had a child you were claiming. So now it results a you definitely owing. Unless again you have an excessive amount of itemized deductions so it could result in a large refund.

Taxes are very complex. Your typical person with just a mortgage and a W-2 is a joke which is why a person like that should do their own taxes via turbo tax and pay the 60 or what not and not 200-300 to a H&R Block. They pay a lot in lobbying every year to deter simplifying the filing for individual tax returns that are super simple. But taxes can get technical quickly. I personal work on taxes but on financial institutions which is its own beast and even more complex in my opinion so my fact pattern might be a little hazy. But I hope it at least shed some light on the matter.
 
Baby mammas out here bought to EAT off their annual EITC bonus. Mine didn't even share it with the boy last yr :rolleyes
 
LazyJ10 said:
My annual announcement. Strive for little to no return. Big returns generally mean you overpaid throughout the year and left that money on the table (opportunity cost). Obviously if you're prone to spend foolishly, then this forced savings may be best for you.

Carry on...
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 Agree Absolutely. Do not give the government an interest-free loan at your expense. Change your withholding so that you get more in each paycheck throughout the year.

If you are worried that you may underpay and owe money, then you can use this link at any time during the year to check where you are expected to come out and adjust your withholding accordingly.

https://apps.irs.gov/app/withholdingcalculator/
 
I'm paying the IRS for an error my tax guy made with my 2015 taxes. I'm going the Turbo Tax route this year. Paid too much to end up owing the government.
 
What podcast OP?

nerd.gif
 
Suberzat1 said:
What podcast OP?

:nerd:
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I have no idea, multiple people posting talmbout some Tax Podcast, I think Tax is a dude. :rofl:

I'm a people person so I thought I'd make it a multi-topic thread cause its NT and why not
 
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