Need to pay 10K in taxes

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grace413

Mon, Mar 03 2014, 6:56 am

amother wrote:

I hate hate hate quarterly taxes!! I pay upwards of $10k every three months and the sting never goes away!

Nobody likes to pay taxes.

amother

Mon, Mar 03 2014, 7:39 am

grace413 wrote:

Nobody likes to pay taxes.

Ye but it hurts significantly less when it's withheld off your paycheck and you never see the money. Also, when done this way you pay double social security tax (usually employer covers half of it) for for me that adds up to an additional $10k/year that I otherwise wouldn't be paying.

self-actualization

Mon, Mar 03 2014, 9:40 am

You will pay the 10k this year and adjust your withholdings for next year. I think on balance you should be glad that your salaries went up so much. I think the AMT kicks in when you make 200,000 gross - so then you don't get the full value of your mortgage interest deduction. However, you DO get the full value of charitable deductions. Charitable deductions are very valuable for people in the AMT, so be sure to give your maser to 501(c)(3) certified organizations and get receipts!

leah233

Mon, Mar 03 2014, 12:08 pm

Anything is possible but this doesn't sound right. I've been an accountant for many years and basically the only people I've ever seen with such a tax bill at filing time were either (1) self employed people who had a very good year (2)Divorcees who received a massive one time alimony payment or (3)people who made major IRA withdrawals not in accordance with the rules.

Even though your salaries went up presumably your withholding also did.It would be worth getting a second opnion

amother

Mon, Mar 03 2014, 3:11 pm

Another professional who does not see a large tax bill due to be at all unusual. Obviously you need to understand what happened and your accountant should be able to explain the issue to you quickly and easily. I manage to explain the issue each time it happens. Some of the reasons that it might happen include those Leah mentions. Just as common are spouses not considering each other's wages as well as other income sources such as investments. They fill out their W-4. They each take all the deductions. And lo and behold, when they file their return, they have under withheld significantly.

What you need to know if how much tax your family will need to pay on all sources of income and plan withholdings and quarterly payments with that in mind.

amother

Mon, Mar 03 2014, 3:43 pm

OP, that was us last year. It was my first full year working, and we did not adjust our withholdings. Big mistake. it was very painful - we had to use all our savings and take out a home equity loan to pay.
You have to pay taxes on time or you get hit with penalties. I am still very mad at our accountant that he did not predict this. Realize that if you do not adjust your withholdings quick you will have the same problem next year as well. Confused

amother

Mon, Mar 03 2014, 4:35 pm

OP
Thank you everyone.
Leah233, none of the reasons you mentioned apply to our situation.
Self-actualization, our combined income is not close to $200,000.
We will be speaking to another accountant this year (we used someone new this year, but he came highly recommended).
What does it mean that spouses don't consider each other's wages? What are we filling out wrong on the w-4?
Amother who was in a similar situation, I feel your pain. Unfortunately we don't have savings that we can use for this;not nearly this amount anyway. We'll figure out how to pay if this is what we need to pay, I'm just trying to understand what we did wrong.

amother

Mon, Mar 03 2014, 5:50 pm

amother wrote:

Technically, you may be filling out the W-4 correctly but the withholding is based on your income ALONE. When you combine your income with your spouses you are probably in a higher bracket, so each of you individually would be in a lower bracket (and are withholding accordingly) but combined you're in a higher bracket and owe $10k in taxes. Also, as someone mentioned earlier, since your combined income is higher than last year you may be getting hit with AMT or deduction/cedit phase-outs.

amother

Mon, Mar 03 2014, 6:19 pm

Each addition dollar you earn is taxed at the marginal bracket, or at your highest tax rate rather than the average tax rate. This is what I referred to when I say you have to consider the other spouse's wages and any other income you might have for withholdings.

Many things could have happened, but my educated guess is that if you to owe 10K and none of the items leah mentioned apply to you, is that you simply under withheld. Did your last accountant run a income and tax projection for 2013?

Another pitfall I've seen besides two spouses claiming the same number of exemptions is when one spouse makes good wages in multiple jobs. I've seen this happen to therapists that might work at 3 or 4 locations, but they spread their time out 25% per employer. The withholding calculation used in payroll does not consider everything else that the employee does.

Bottom line, you need to know what your income is from all sources and what your tax bill will approximate to and plan withholding according to that. You can ask for additional withholdings or submit quarterly payments to make up the shortfall.

groisamomma

Mon, Mar 03 2014, 7:59 pm

Am I understanding this correctly? I can choose the amount of money to withhold from taxes and get a smaller refund later?

I like this. I'd rather have more $$$ monthly than get a big refund once a year.

Tova

Mon, Mar 03 2014, 10:12 pm

Yup, and you absolutely should do that. Why should the government hold your income all year at 0% interest? You will need to fill out a new W-4 form.

Peanut2

Mon, Mar 03 2014, 10:48 pm

We often consult with an accountant on how much to withhold. We aren't even making much. It's just a good idea. (Never been charged for that question either.)

Kugglegirl

Tue, Mar 04 2014, 12:44 am

I give you a bracha that you should have an amazing year with parnassa & pay even more in taxes next year!

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