Income Taxes 101

I think I do reasonably well with my own finances... until now... I
just did turbo tax for 2009 taxes.
In 2008 I received a $1800 refund
In 2009 it shows me owning $2600+.
That is a $4400 swing in taxes... can anyone tell me if the stimulus
plans could account for such a big swing in taxes from one year to the
next? I changed no withholdings, no deductions and received one
additional credit in 2009. I was not expecting such a big change in
I realize this is not a tax group, but I do know some of you out there
have some tax knowledge. My goal every year is to get the child tax
credit back (without the credit, we would owe about $300 each year).
Something happened which is making me question this logic now.
Reply to
In article ,
I's guess a keypunching error in either the 2008 or 2009 return . Print out each year's form and lay them side by side and look for the difference.
A common item is the sale of an annuity or a capital gain which suddenly makes parts of Social Security taxable.
Reply to
Avrum Lapin
I have double checked numbers (went thru return 3 times) the only difference found thus far is my taxes paid in 2009 was $4000 lower.
I am still working, not collecting annuities, only schedule on returm is schedule A for mortgage interest and property taxes.
Reply to
jIM - the tax rates haven't changed much (I mean the cutoff from one bracket to next). Unless your income has changed to the higher, you shouldn't have seen that kind of swing. You should compare your taxes line by line. Tough to guess at this.
Reply to
On Sat, 13 Feb 2010 17:02:23 -0600, jIM wrote:
Without seeing the returns side by side, it's impossible to say.
One thing you might consider involves the Stimulus tax changes in mid-year 2009. Remember that it involved an automatic reduction in withholding but had income limits on who could qualify. If you exceeded those limits by year-end you would not qualify for the stimulus and have to repay the taxes.
Reply to
HW "Skip" Weldon
that is not awing in your taxes, that is a swing in your final tax payment. How do the total income tax for each year compare? How do the witheld taxes compare?
Reply to
All other things being equal, $4000 less withholding changes an $1800 refund to a $2200 tax payment.
Why did the withholding go down?
Reply to
It was the stimulus which caused the problem I am reading this document now
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,,id 4447,00.html pretty what this amounted to was a marriage penalty and me using allowances to withhold taxes instead of fixed amounts.
I claimed 14 allowances from my paycheck to withhold less in taxes (been that way since 2005). This was to offset $45,000 in mortgage interest and property taxes on schedule A.
I should have done w-4 differently (or so I have been told) so feel free to turn this into a "how to fill out a w-4" lecture. Thx for feedback.
Reply to
I was able to claim the $800 making work pay credit. Gross income before all deductions was 105k on 2009 return. That 105k does not include the money which went to 401k, which was about 15k I think.
Reply to
This may be straying, but how do you afford to pay 42% in mortgage interest (which does not including principal) on 105k gross income?
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Reply to
I wish I could tell you from what you've posted what caused your problem, but I can't - not enough details. With the disclosure that I make most of my income as a tax pro, I can tell you this:
1 - every year the IRS tweaks the withholding tables in an attempt to issue less in refunds overall. It sucks, but think about how you feel now knowing you owe money you hadn't planned for. This is what happens to the government every year when millions of dollars in refunds are sent to taxpayers. I am NOT defending the government, just stating a fact;
2 - if you worked multiple jobs, or if you and your spouse both worked, that will contribute to such a swing. When there are multiple employers involved they do NOT consider what the other is doing. So if you tell two employers that you are married with 14 exemptions then you're excluding TWO married couples and 28 exemptions worth of income from withholding;
I see these two things hitting my clients all the time. For the ones who like to get huge refunds (10K or more) it isn't too bad, they just get smaller refunds. But or the ones who try to get close to ZERO - no refund no balance due - they usually get slammed.
I am NOT admonishing you, but this is one of those areas where tax planning can help, whether you do it yourself or use a pro like me. You should check your income and withholding at least twice during the year to see if you're on track - I like to do it in July (after we've got six months of information to work with) and again in November (while we still have time left to either make an estimated payment OR handle any shortfall through withholding).
Sorry for your pain - but do NOT expect it to get better. I expect it will get worse - when the tax rates increase I don't expect to see a corresponding increase in the withholding table rates AND I expect to see more people hit with AMT and phase outs.
Gene E. Utterback, EA, RFC, ABA
Reply to
Gene E. Utterback, EA, RFC, AB
Which is why one should take a look at their first couple pay stubs in January to see if Fed withholding has changed. Just when I thought I had things in balance to owe a tiny bit in April, that table shift combined with lower interest expense on my Sch A, put us back to owing. This needs to be a yearly tweak. Joe
Reply to
Gene- this is the type of response I was looking for- between yours and Joe's, it appears I need to check more mid year and in November to see if I was "close" when planning for a zero refund.
Thank you very much for taking some time to answer this- I thought it was as simple as set it and forget it, but that does not appear to be a solution in this case.
Reply to
When our good friend, Ron Popiel is put in charge of the tax system we may have a "set it and forget" tax, but not with the current rules!
Any number of things can cause the kinds of problems you encountered. How many here remember back when Congress made a RETROACTIVE tax change AFTER tax season had ended? This caused tens of thousands of taxpayers to have to pay additional taxes AFTER they had already filed! And Congress's answer to the uproar - we'll let you pay the additional money over 4 years. Oh Boy, what a deal!
Paying taxes is like a driving a car - MOST of the time we do it without paying much attention to what's happening around us, sort of like being on autopilot - but you still have to be alert to the unexpected.
Glad we could help, Gene E. Utterback, EA, RFC, ABA
Reply to
Gene E. Utterback, EA, RFC, AB

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