2008 Taxes - I'm confused.

[SpikeyFreak]

So, I really don't want a big return at the end of the year for a couple of reasons. Unimportant for now.

Last year I got back $110. But this year I'm getting back $5,400. Turbo Tax, and not even itemizing. Everything is 100% legit, no cheating at all. I've gone over this thing like 5 times, including referencing pay stubs to make sure my W-2 isn't wrong. Everything is right.

What the fuck?

So, things that have changed. My wife stopped working and we had a child. Now, I didn't change my exemptions because it just slipped my mind. However, I have done some research, and it looks like that would make very little difference. Like, $100 a month. I do get a big bonus, so I know that is skewing it a little because they take out a huge amount of that for taxes, but even if it were ALL extra taxes (which it's not) it wouldn't explain the $5,400.

So what gives? Do I have to lie and change my exemptions to like 10 to keep from giving the government a fucking $5000 loan every year? Anyone else have anything comparable?

--Confoozled Spikey

[Lady Fury]

Earned income credit?

[Name Lips]

"Lying" on exemptions is fairly common. It's the easiest way to control how much gets taken out of your check. And nobody ever checks it.

We have 3 kids and got a huge sum too. We still have most of it in savings.

[AZRogue]

The fact that you have a child means you have a Qualifying Child which decreases the amount of money you owe on your taxes--by a substantial amount and not necessarily anything near the difference you get for claiming an extra exemption on your W-4, which doesn't take into account whether the exemption you claimed for a dependent is a Qualifying Child or not--so you're not going to be paying nearly as much as you would have, ESPECIALLY since you didn't adjust your withholdings.

On top of that, you also probably qualify for a large Earned Income Credit due, also, to the Qualifying Child. The amount decreases based upon your income but can be a hefty amount of money.

That's my understanding of it, at least. I don't have a child, but I always do my taxes by hand each year because it's mildly interesting.

EDIT: The bulk of the money is, most likely, Earned Income Credit. You can control the rest by changing your W-4 to make sure you don't pay out too too much over the course of the year, but no matter what you're still going to qualify for a large chunk of Earned Income Credit (unless you're making too much money to qualify). That's not money they've taken from you, so there isn't much you can do about it.

On a side note, I think they're increasing the number of children you can use towards Earned Income from a maximum of two, as it is now, to three. I think I heard that somewhere, though I'm not positive. A buddy of mine with 4 kids currently gets back around $8000 each year. I don't even want to imagine what he's going to get if they increase the Earned Income Tax Credit to include three children on top of the deductions for their being Qualifying dependents.

[SpikeyFreak]

I make way too much for EIC.

--Sleepy Spikey

[SpikeyFreak]

"Lying" on exemptions is fairly common. It's the easiest way to control how much gets taken out of your check. And nobody ever checks it.

We have 3 kids and got a huge sum too. We still have most of it in savings.
Did you get a huge some last year? Is it EIC?

--Scatter Brained Spikey

[Name Lips]

Yes, for me it's EIC. It maxes out at 2 kids, but for the amount we make it's a huge boost.

http://en.wikipedia.org/wiki/Earned_Income_Tax_Credit#Earned_income

[Freedom Canadian]

If you wife stopped working in the middle of the year, this could make a huge difference.

[Enk]

Your wife stopped working = lower tax bracket. Having a child = extra dependent, which is a double dip as it provides both the 3500 deduction from taxable income and a $1000 real adjustment in the "taxes paid" section. Oh, and the new mouth to feed in 2008 means you get a $300 tax rebate adjustment, too.

In addition, I think the tax rate was lower overall in 2008 - we ended up paying negative taxes after including the additional child credit and the tax rebate adjustment.

[Harry]

Damn.

Anyone want to have my baby? Anyone?

[Lady Fury]

Damn.

Anyone want to have my baby? Anyone?

I'll loan you some kids. How many do you want? I suggest the taking a potty trained one that way you aren't constantly going in and out of the bathroom for butt wiping duty.

[AZRogue]

You actually have to care for them for the majority of the year, which kind of nullifies any more you get on the back end, if you ask me. :)

[Limper]

Bonus pay is taxed at the absolute highest bracket regardless of what bracket you are actually in... thus if you got a $10,000 bonus they'll tax it at the 35% rate.

If you aren't actually in that bracket then you get a big chunk of it back.

My wife and I both get a good chunk of our pay in the form of bonus so I'm speaking from experience.

[Pigs in Space]

Spikey: wtf is wrong with you.

You are the reason for the economic crisis.

I'll loan you some kids. How many do you want? I suggest the taking a potty trained one that way you aren't constantly going in and out of the bathroom for butt wiping duty.

Harry: The younger ones have the most valuable organs.

[Name Lips]

PIS, a lot of people would rather get more money up front and then owe money at tax time. The theory is that money now is worth more than money later because you could concievably invest it and make even more money before it comes due. Even sitting in a savings account making bank-level interest is more money efficient long-term then waiting and getting a large, interest-less lump sum.

[AZRogue]

Keeping your money during the year is always better than waiting until the end of the year. Taxes aren't a savings account and shouldn't be treated as such. :)

[Limper]

PIS, a lot of people would rather get more money up front and then owe money at tax time. The theory is that money now is worth more than money later because you could concievably invest it and make even more money before it comes due. Even sitting in a savings account making bank-level interest is more money efficient long-term then waiting and getting a large, interest-less lump sum.

Technical term for that is Opportunity Cost.

[SpikeyFreak]

Bonus pay is taxed at the absolute highest bracket regardless of what bracket you are actually in... thus if you got a $10,000 bonus they'll tax it at the 35% rate.

If you aren't actually in that bracket then you get a big chunk of it back.

My wife and I both get a good chunk of our pay in the form of bonus so I'm speaking from experience.
This is part of it. I think it's just a confluence of lots of events. An extra child (lulz), a big bonus, the wrong exemptions, etc.

Now I just want to get it so that I get my $400+ a month instead of at the end of the year. Does everyone lie about their exemptions?

--Annoyed Spikey

[Limper]

This is part of it. I think it's just a confluence of lots of events. An extra child (lulz), a big bonus, the wrong exemptions, etc.

Now I just want to get it so that I get my $400+ a month instead of at the end of the year. Does everyone lie about their exemptions?

--Annoyed Spikey

I claim 0 and single my wife claims 2 and married... we got back $300.

Sadly its a very inexact science so trial and error is the way you'll figure it out.

[The Theocrat of Poon-Tang]

Bonus pay is taxed at the absolute highest bracket regardless of what bracket you are actually in... thus if you got a $10,000 bonus they'll tax it at the 35% rate.

If you aren't actually in that bracket then you get a big chunk of it back.

My wife and I both get a good chunk of our pay in the form of bonus so I'm speaking from experience.


Right, the withholding is at the higher percentage. The tax, as you say, comes down to how things shake out at the end of the year.

Spikey, without seeing your return I can't say for sure, but I bet a good deal of it is, as others have said, the addition of a child and the reduced income from your spouse. You are certainly benefitting from the lower marginal rates that Bush cut and I believe will sunset pretty soon (a big mistake in my opinion).

This is as good a time as any to urge you all to try and cut your refund as close to zero as possible - knowing that it wasn't your intention to have such a huge refund, Spikey. You certainly seem to "get it" when it comes to big refunds come tax-time and view it as it is, a no interest loan to the government.

I still shake my head in amazement at people who jump up and down and celebrate that "government is giving them money!!!!". :rolleyes: Trying to explain to them that it's really their money is often met with bewildered looks. I might as well be explaining particle physics to some of them.

[The Theocrat of Poon-Tang]

Now I just want to get it so that I get my $400+ a month instead of at the end of the year. Does everyone lie about their exemptions?

--Annoyed Spikey

Whoever is telling anyone to lie about their exemptions is playing with fire. Yes, the government can cross check dependents with social security numbers (that's why they have you put them on the return). Misc. Itemized deductions, too, but you have to cross the 2% threshold there, which isn't easy for most people to do.

There are ways you can goose up your return - charitable contributions if you itemize can always be increased to a certain point (just don't get stupid and say you gave $10,000 when you make $50,000. Think in terms of hundreds of dollars, not thousands.)

I would STRONGLY urge anyone not to mess with stuff that can easily be cross checked by the IRS like exemptions/dependents. Eventually you will get caught. The IRS may not be smarter, but they are getting better at tying their information to other systems to cross check a lot of basic information.

[Limper]

Right, the withholding is at the higher percentage. The tax, as you say, comes down to how things shake out at the end of the year.

Spikey, without seeing your return I can't say for sure, but I bet a good deal of it is, as others have said, the addition of a child and the reduced income from your spouse. You are certainly benefitting from the lower marginal rates that Bush cut and I believe will sunset pretty soon (a big mistake in my opinion).

This is as good a time as any to urge you all to try and cut your refund as close to zero as possible - knowing that it wasn't your intention to have such a huge refund, Spikey. You certainly seem to "get it" when it comes to big refunds come tax-time and view it as it is, a no interest loan to the government.

I still shake my head in amazement at people who jump up and down and celebrate that "government is giving them money!!!!". :rolleyes: Trying to explain to them that it's really their money is often met with bewildered looks. I might as well be explaining particle physics to some of them.

Any trick to how one picks W4 options in order to get that to 0? I've always found it pretty damn arcane.

[The Theocrat of Poon-Tang]

Any trick to how one picks W4 options in order to get that to 0? I've always found it pretty damn arcane.

I wish I knew man, but my answer won't be of much help: trial and error. :D

Actually, the last few years I've owed some money, so I've been on the other end lately. Haven't done mine yet, so I'm anxious to see if raising my number did the trick to make it zero. My goal is always to get a small refund of under hundred bucks.

[TiQuinn]

I wish I knew man, but my answer won't be of much help: trial and error. :D

Actually, the last few years I've owed some money, so I've been on the other end lately. Haven't done mine yet, so I'm anxious to see if raising my number did the trick to make it zero. My goal is always to get a small refund of under hundred bucks.


I like getting back as much as possible because then I feel like I've won the lottery!! WEEEEEEEEEEEEEE!

:happybounce: :yay:

[The Theocrat of Poon-Tang]

I like getting back as much as possible because then I feel like I've won the lottery!! WEEEEEEEEEEEEEE!

:happybounce: :yay:


:lol:

If only I didn't know people who actually believed that. :D

[SpikeyFreak]

I claim 0 and single my wife claims 2 and married... we got back $300.

Sadly its a very inexact science so trial and error is the way you'll figure it out.
So why am I getting so much back? Married filing jointly + 2 kids. Standard deduction gives me $5K+.

Does the IRS assume that both partners are going to have a job making about the same money with the paycheck deductions? That's the only thing I can think of that would make that happen.

--Bankin Spikey

[Limper]

So why am I getting so much back? Married filing jointly + 2 kids. Standard deduction gives me $5K+.

Does the IRS assume that both partners are going to have a job making about the same money with the paycheck deductions? That's the only thing I can think of that would make that happen.

--Bankin Spikey

HPFM is the best answer I have... but what you say is likely close to right.

[Name Lips]

I still shake my head in amazement at people who jump up and down and celebrate that "government is giving them money!!!!". :rolleyes: Trying to explain to them that it's really their money is often met with bewildered looks. I might as well be explaining particle physics to some of them.
I'll match your "stupidity" and raise it 20%.

I know people who refuse to file taxes specifically to avoid getting the "free government handout" because it's "blood money" and tinged with all the immoral karma of the US government.

[The Theocrat of Poon-Tang]

I'll match your "stupidity" and raise it 20%.

I know people who refuse to file taxes specifically to avoid getting the "free government handout" because it's "blood money" and tinged with all the immoral karma of the US government.


Wow, that's stupid with a smidgeon of crazy.

[Black Angel]

I'm also confused why getting money back is such a problem?

I guess it's probably to do with the differences in our taxation systems, and I freely admit I have no idea how yours works over there.

Australian personal tax is only done once a year. We personally regularly end up with refunds of $2-3k each, usually due to deductions for charity, professional memberships and refunds of tax taken out on bonuses. There's no way to get around it or get it throughout the year, so we get a refund. I like it, at least we don't owe money. Also, if you're due for a refund, you get it back within 2 weeks, but if you owe money, you get almost 6 months to pay.

[Morbidity]

6 months to pay? What makes you think this BA?

I owe money every year as I'm in the highest tax rate so no refunds on bonus. Plus I owe money on dividend income, interest income etc, which exceeds charity donations. I have 2 weeks to pay it, which is why I file my tax return at the last possible moment. I haven't filed my 2007/08 tax return yet, as it was worth my while to get an accountant to do it to give me anothe 6 months as I've got capital gains tax galore to pay. Really not looking forward to handing over to the government yet more money.

[Black Angel]

6 months to pay? What makes you think this BA?

I owe money every year as I'm in the highest tax rate so no refunds on bonus. Plus I owe money on dividend income, interest income etc, which exceeds charity donations. I have 2 weeks to pay it, which is why I file my tax return at the last possible moment. I haven't filed my 2007/08 tax return yet, as it was worth my while to get an accountant to do it to give me anothe 6 months as I've got capital gains tax galore to pay. Really not looking forward to handing over to the government yet more money.

One year PiS had around $2k to pay back after his redundancy, then getting more work straight away. We filed our return before end of October and didn't have to pay until end of March. Ok so that's only 5 months, but still.

I guess if you wait longer to file your return, you have to pay by the same time, but effectively it's less, because you took longer to file it. By filing it earlier, you can plan for how much you're going to have to pay.

[Morbidity]

Perhaps the rules have changed. I usually submit my tax return on 31 October and get a request for payment sometime in mid-November which they want within 2 weeks. Don't know. The world of tax is strange.

[Black Angel]

Perhaps the rules have changed. I usually submit my tax return on 31 October and get a request for payment sometime in mid-November which they want within 2 weeks. Don't know. The world of tax is strange.

Well that's certainly possible, it was 3 tax years ago and tax is a weird world indeed! :)

[SpikeyFreak]

I'm also confused why getting money back is such a problem?
Here they take your income tax (and a couple of other taxes) out of each paycheck (usually). They try to estimate it so that it's going to be about what you should pay. Then at the end of the year (well, the beginning of the next year), you get all your finance shit together and figure out what you were actually supposed to pay. If it's more than what they took out of your paycheck, you owe them money. If it's less, they owe you money.

The problem with getting $5,400 back is that I could have had $450 a month more to make it easier to make ends meet. Christmas would have been better, we could have bought some stuff we needed but decided to wait on, it just would have been a less stressful year with an extra $450 each month.

My consternation stems from the fact that it looks like the same thing is going to happen next year, and short of lying to the IRS to not have to pay as much each paycheck, I don't see any way around it.

--Procrastinating Spikey

[Black Angel]

That's what happens here too. I understand you preferring to have the money at the time than getting it all at once, but I guess I don't see the point in getting all worked up about it when there's nothing you can do about it. I wouldn't be lying about it, myself.

[SpikeyFreak]

That's what happens here too. I understand you preferring to have the money at the time than getting it all at once, but I guess I don't see the point in getting all worked up about it when there's nothing you can do about it. I wouldn't be lying about it, myself.
I get worked up about it because it's the money with which I'm trying to build a future for my retirement and for my kids' educations.

Pretty important shit.

Plus any time I don't understand something that I'm trying to understand I get pretty worked up about it.

Plus I'm always worked up about everything.

--Hypertension Stage 2 Spikey

[Enk]

...My consternation stems from the fact that it looks like the same thing is going to happen next year, and short of lying to the IRS to not have to pay as much each paycheck, I don't see any way around it.

--Procrastinating Spikey

Based on what I remember from the last time I changed my W-4, the worksheet and the actual # claimed don't have to match. You should be able to claim the dependents you need to in order to work it out.

[SpikeyFreak]

Based on what I remember from the last time I changed my W-4, the worksheet and the actual # claimed don't have to match. You should be able to claim the dependents you need to in order to work it out.
Ha! Found something.

"Enter “1” if:
B You are married, have only one job, and your spouse does not work;"

There's another exemption.

The W-4 specifically says that you can claim less, but not more than you are allowed. The gub'ment wants their money!

--Happy Spikey

[emerald]

The government gets its money regardless of what you claim on your W-4 because if you screw up and claim too many then you have to pay at the end of the year. And if you manage to raise the number and still get a refund I dont see how they can complain.

We got $6000 back as a refund this year but its all EIC and such as I already have my W-4 withholding so high I dont have any federal or state withholding taken out each month.

What we are doing to simulate what you complaining about is we put that money in a savings account and are going to give ourselves a certian extra each month. The saving account should empty just as we get our next tax refund and we can replentish the account.

[SpikeyFreak]

Hmm, I'm thinking they don't care if you put more. On the W-4 it says that you can claim less. It does not say that you can't claim more.

And here's what really makes me think you can claim more: 2009 Withholding Calculator (http://www.irs.gov/individuals/page/0,,id=14806,00.html). It actually says, "You should change your withholding in the following ways: claim 16 allowances."

--Tax Pro Spikey