Taxes and withholdings

[Chicky2]

Ok, so we have been playing w/my dh's withholdings for several years now. The IRS withholding calculator says we should withhold 10. So we have actually safely gone up to 13, and still got a $1500 refund because we do own a home, get a medical deduction for dental work, and we claim a loss on our farm each year.

We may or may not get a medical deduction next year, depending on how much we have to have done this year. I expect for it to be more than 7.5% of our income, though. I know we'll again be able to claim a loss on our little farm (we always spend way more than we make off our measly egg and meat pen sales).

My ? is would it be safe to go up to 15 on his w/holdings now? We don't want to get so much back each year. I mean, really, it's pretty ridiculous to loan the gov't $ interest free, right? It's not like they'd do it for us!

Wish we could get our neighbors to understand how all this works. They struggle and struggle thru the year, then get a massive return and blow thru it, and then struggle and struggle again by summer....Anywhooooo....

Advice anyone?

[jentilla]

Sorry we loan the giv. every year. Not b/c we want to, but b/c one year, a year we were broke, we owed. Dh's income also has been steadily increasing by ten of thousands each year so I just hate to pay a tax bill. I'd rather get back a little so that I fee like I paid less taxes, lol. It's all pyschological!

[velochic]

It sounds like you are very financially savvy, as you understand the folly of getting back big refunds and avoiding any emotional factor of paying taxes. We try to owe every year if we can. We don't usually pay more than a couple of thousand and have never had so little withheld that we've had to pay a penalty, but it's gratifying knowing that we're using their money instead of visa versa. I say try for whatever you think will bring you closest to $0 due and $0 back. If you think 15 is the magic number, I'd say you've done your math and to go for it.

[Chicky2]

Thanks for the input, Velochic. We def. do not want to have to pay, and certainly don't want a penalty. What I'm not sure of is this:

If we try to end up w/$0 back, we would need to get roughly $125 extra in our pockets each month, based on our refund this year. But is that how I figure it? Do I base it on the refund itself, or the amount of Federal taxes taken out for the year? If we end up w/the gov't not taking out anything at all, will we be penalized? Not sure how the penalties work... We have 3 qualifying kiddos, and the mortgage interest, property taxes, farm, and probably dental. Am I even making my ? clear? He actually only had $486 taken out in 2009 for Fed. taxes.

Ack, sorry if it sounds all jumbly...

[karkli]

It sounds like you've done your homework. If I were you, I think I would go ahead and up the withholding to 15, but save the additional amount in your DH's paycheck in a separate savings account until you do this year's taxes next year. That way, you are setting aside the "right" amount for the government without loaning it to them unnecessarily.When you do your 2010 taxes, if you find yourself owing, you'll have the money available and ready to go. If you don't, then you can be confident leaving your withholding at 15 for 2011, plus you'll have that little bit of savings that you can build into your budget in 2011.

[Chicky2]

Originally Posted by karkli

It sounds like you've done your homework. If I were you, I think I would go ahead and up the withholding to 15, but save the additional amount in your DH's paycheck in a separate savings account until you do this year's taxes next year. That way, you are setting aside the "right" amount for the government without loaning it to them unnecessarily.When you do your 2010 taxes, if you find yourself owing, you'll have the money available and ready to go. If you don't, then you can be confident leaving your withholding at 15 for 2011, plus you'll have that little bit of savings that you can build into your budget in 2011.

That is a very good idea.

[angelcollector1]

They withheld $486 and you're getting back $1500. Do you qualify for earned income? If so, you can keep your exemptions the same but ask for the EIC to be given to you in his weekly paycheck. You could also change what he claims to exempt and not have them without any $ since you get $ back every year and if they withheld $486 it sounds like you're eligible for major deductions. Either way, it's a change to what you pay out each week to IRS and you can bank that $. If something changes in your financial status and it looks like you'll have to pay, you can change your exemptions anytime throughout the year.

[Chicky2]

Originally Posted by angelcollector1

They withheld $486 and you're getting back $1500. Do you qualify for earned income? If so, you can keep your exemptions the same but ask for the EIC to be given to you in his weekly paycheck. You could also change what he claims to exempt and not have them without any $ since you get $ back every year and if they withheld $486 it sounds like you're eligible for major deductions. Either way, it's a change to what you pay out each week to IRS and you can bank that $. If something changes in your financial status and it looks like you'll have to pay, you can change your exemptions anytime throughout the year.

No, we do not qualify for EIC. Our deductions are a bit over $8000 in mortgage interest, 3 qualifying dependents, $2400 in property taxes, medical deduction is slightly more than 7.5% of our income, and we do a loss on our farm, which usually comes out to about a $7400 loss.

I think I'll have him bump it up to 14 and see what happens w/his next check (he's salary, so I don't have to check it each week). He did get a raise back at the end of Sept, but it wasn't a big one--only about $1200/yr.

[dawningmama]

If the numbers look good, I don't see why not. I would recommend checking total withholdings each quarter or so. That way, if there is a change (as the tables were changed midyear last year to accommodate the Making Work Pay Credit), you can always reassess and make changes if you need to. Just keep an eye on legislative changes that affect taxes.

[Chicky2]

Originally Posted by dawningmama

If the numbers look good, I don't see why not. I would recommend checking total withholdings each quarter or so. That way, if there is a change (as the tables were changed midyear last year to accommodate the Making Work Pay Credit), you can always reassess and make changes if you need to. Just keep an eye on legislative changes that affect taxes.

Very good suggestions. Thanks!