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Well, crud. No tax refund for us -- we owe!

post #1 of 5
Thread Starter 
We usually get back about $2,000 from the federal government, and we break even with the state.

This year, we owe $1550 to the feds and $920 to the state. WTF?!?! :

I can't figure out what happened. The only major changes we've had are as follows:

We increased our total income by about $13,000. We're still in the same 25% tax bracket, though.

We switched our retirement contributions. We used to contribute about $8500 a year to our 403b plans, but now we are contributing that amount to our Roth IRAs. (Could that be it?!? I know this is probably what had the biggest impact on our situation, but I didn't think the impact would be THAT significant.)

Still paying a student loan and a mortgage, though the amounts being applied to interest are a little smaller every year.

We "only" paid $6,500 for childcare this year instead of $10,000 like we did in 2007.

Charitable contributions are about the same.

So, do you think the switch to making Roth contributions did us in? I'm guessing it did, but I'm not a numbers person, and I never did the math; I justr assumed it wouldn't have all that significant of an impact.

I just find it ironic that I feel like we're finally doing everything right -- building our emergency fund, living without credit card debt, and diversifying our retirement income so that we'll have both taxable AND tax-free income in retirement, and wham -- we have to pay for it.

I've got some new witholding certificates for us to work on tonight so that this doesn't happen again next year, but I can't help but be kind of disappointed about this year.
post #2 of 5
So you have to pay taxes on 13,000 more than last year *and* the 8500 to your Roth IRA?
If you are in the 25% tax bracket for both of these increases federal taxes would be:
$2125 for the Roth IRA contributions and $3250 for the $13,000 extra income.
That'd be $5375 more than you owed last year.

We have to pay this year too. We're DINK and don't have a mortgage...sigh. I'm trying to adjust my withholding for 2009 so we won't have to pay next year. We'll see.
post #3 of 5
Well, assuming your withholding was correct:

Taxes due on the $8500 (at 25%) would be $2125 and you lost the deduction on $3500 of childcare expenses (about $900). That right there is a swing of $3,000.

sounds right to me.
post #4 of 5
You're treating the $13,000 and the $8500 as two separate entities. Add it together; you are being taxed on $21,500 that you were not last year (I think).
post #5 of 5
Thread Starter 
Quote:
Originally Posted by Emmeline II View Post
You're treating the $13,000 and the $8500 as two separate entities. Add it together; you are being taxed on $21,500 that you were not last year (I think).
Yep, you're right. When I look at it that way, that makes totally sense. I'm just BUMMED. I know that's selfish and all, but I am.

As I told DH last night, though, this is the price we pay for the privilege of living in a peaceful democracy with a reasonably well-run government. And really, our income went up, and we're able to contribute to our retirement. We're hardly in a position to complain.

Now to figure out how to adjust our witholding so we break even next year....
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