BIG Difference in some numbers from '05 to '06

You probably left off some credits on your 2005 example, however the real biggie that I see, is that since you say you are married, WHY are you computing tax as either single or (probably) married filing separate? I'm guessing that y'all have two children. ChEAr$, Harlan Lunsford, EA n LA

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First problem that I see is that the 2006 Tentative Tax shown is for filing "Single" not "Married filing jointly". Check to see if you checked the Single box instead of Married box. You may have this mistake in both years. However, the increase in total tax is about $2500. GIven that the Total Income increased by $10K and you are in the

25% bracket, the increase in total tax should be about $2500. That's what tax brackets do. The fact that you have so many tax credits makes the increase look so large relative to total tax.

It looks fine to me. Your taxable income went up about $10,000. In the 25% bracket your tax would go up about $2,500, which is exactly what happened.

-- Phil Marti Clarksburg, MD

Michael, your (taxable) income rose from $27,971 to $37,836 or $9865. Your tax rose from $1479 to $4007 or $2528. You are in the 25% bracket, which in 2006 was for joint income over $30,650. There are other anomalies that allow or remove certain credits or deductions, thus creating phantom brackets, but you can see

for theeasiest-on-the-eyes view of rates. One bit of advice I'm compelled to offer: First, do you have access to a 401(k)? If you put some of that raise in it, you can save 25% on taxes by doing so. If your employer matches the deposit, put in enough to get the match, it's free money. If they don't have a 401(k), consider using IRAs to save. Second bit, is that you are getting refunds in both years of a huge portion of the tax withheld. Raise your W4 exemptions to reduce withholdings. Put the money in the bank, if you feel you don't want to put it away long term. Using Uncle Sam to save with no interest on your money isn't a great idea. Just my thoughts. JOE

wrote....

Welcome to the next level of progressive taxation

The two summaries are confusing your analysis.

Actually as a Married Filing separate filer, based on the numbers I see, you were in the 10% & 15% brackets in 2005 . In 2006 the taxable income increase of $9865 bumped the last $7186 of that income into the 25% bracket. Do the numbers from the TXI point to the Income Tax alone:

YEAR----|------2005-----|--------2006---| TXI -------|---$27971-----|----$37836----|

------------|------------------|-----------------|

10%------|------$730.00--|---$755.00----| 15%------|----$3100.65--|--$3465.00----| 25%------|----$------------|--$1796.50----|

------------|-----------------|------------------| Inc Tax---|----$3830.65--|--$6016.50----|

Taxable income went up $9865.

Tax went up $2528.

The marginal tax rate on the increased income is 25.6%.

What is the issue?

Seth

Seems very reasonable. I didn't do any calculations but your AGI went up about $11,200 and you are in the 25% bracket and your tax went up about 2500, and that even includes $400 of AMT. If anything, I'd be OK with a slightly higher tax.

-- Art Kamlet ArtKamlet @ AOL.com Columbus OH K2PZH

It appears that the question is why the tax was so low in

2005. Did you claim one or more credits in 2005? Maybe an education credit? The 2006 tax looks to be about right but 2005 is way too low.

Lanny K. Williams, CPA Nawarat, Williams & Co., Ltd. Income Tax Services for Expatriate Americans

My Bad - for marries filing joint, the 15% bracket goes right to $61,300. You need to make sure your filing status is correct on the tax software. Something is wrong.... JOE

Thanks for all of your help!

For some clarification: I filed 3 children both years I filed 9k of home interest both years I had 2k in real estate taxes both years Last year I had to pay penalty of 600 because of too much writing off? And 300 this year. They also took 600 FROM our child-refund for whatever reason ... I'm guessing it has to do with salary and write-offs... another penalty. They did not do that the year before.

Does this make since?

Thanks again for your replies!

Good point, Joe. You wouldn't believe how many clients I meet that "like getting a refund back." That annoys me to no end. Sorry for the off-topic comment.

Not completely and not yet,Michael. Somewhere up there you mentioned a wife. How did you (and her) file in 2005? Jointly? And what status are you "trying" to use for 2006? Really, I think that's the key.

ChEAr$, Harlan Lunsford, EA n LA

Thnx for the response. My wife doesn't work. Both years we were married filing seperately.

Then here's a free tip: Since your wife didn't work (I assume you mean she had NO income last year), why not file a joint return? You may, you know. ChEAr$, Harlan Lunsford, EA n LA

Why?

"None of your business" is an acceptable answer. I just want to make sure you know you can file jointly even if she has no income and that by filing MFS you are costing yourself money.

-- Phil Marti Clarksburg, MD