WAY OFF TOPIC! *Warning* Scary IRS stuff!

[backafteradozenyrs]

We always do our taxes in the early part of January. This year that was a moot point (at least here in the U.S. it was) because the IRS wasn't accepting electronic returns until today.

So I wasn't so concerned when DH's company didn't give him his W2 until yesterday. I knew I could knock out the forms this afternoon, transmit this evening & join the que in waiting for our refund. HA, what a joke that was!

If we had NOT purchased this home last year, we would have owed over $2k in taxes! We have never owed federal income taxes before, always have received refunds (& thanks to the EIC, they were nice refunds). As it is, I've got to go find the form to set-up installments for the taxes we do owe & the form to request a waiver for the penalty for haveing underwithheld....have any of y'all EVER heard about that? (I know I hadn't until the H&R Block website brought it up!)

[Rose]

If you are self-employed then yes if you under pay your quarterly then they hit you with a penalty but they never give you a break for over payment. If you are an employee then there should not be any penalty. You are allowed to chose your withholdings. I would double check what you are being told. I do not care for H&R because for all their big talk they are so under informed it is a shame. We have an accountant and even with the extra price for his service we always come out cheaper then going to H&R.

[backafteradozenyrs]

No, Rose--my DH is an employee of a major electrical contractor in our state (they are a national company with sites in like 28 different states).

Found out more about the penalty. It is if a person has a tax liability of $1,000 or more (after factoring in what was with held) & they had with-holdings that did NOT either equal 100% of their previous years liability OR 90% of this years amount due.

Whew, we dodged the bullet on that one, but DH is going to have to go in to the office one day next week & change his with-holding so we don't get zinged next year.


edited to add: We actually use TurboTax (through our credit union) but when I saw the drastic differences between last year (& all years before that) to this years, I went over to the IRS & picked the first on the list for free e-file to double check what TurboTax was saying. It was there in H&R Block (after confirming what TurboTax was reporting for our taxes) that we were 'informed' that because we DID have a tax liability, we MIGHT have a penalty...it was on the IRS website where I got the good info (or BAD as it were).

[backafteradozenyrs]

So the days of deciding your own with holdings are effectively over (I remember when I was younger/unmarried & I dropped my w/holdings down to 0 so I could have more income one year...just for the fun of it--until Tax time rolled around!)

As for the rest of it? I'll be completing our return around April 1st & printing out 2 copies...one to file (along with the form to arrange payments) and the other hard copy for our file.

I'll mail out theirs on the 14th or 15th of April

[Allyn]

If you're an employee, it's kinda hard to get penalized for under withholding unless you've got some other monumental financial stuff going on. The tax withholding tables, if you claim the accurate amount of withholding exemptions, works out to be about 80 percent of your taxes so you'd have to pony up the other 20 percent when you file. When you figure in deductions and such, you'd usually break even. . or so they'd figure. If you claimed 0 exemptions, they'd take more money out each paycheck so you'd get a bigger refund (or maybe not owe as much when you file). The more exemptions you claim, the less money they deduct out of each paycheck.

And yes, they can penalize you for overpaying if you purposefully overpay to get a big refund. They don't want to be used like a savings account.

Edit: Don't get all worked up about the mention of penalties. I know the IRS tries to be all scary and stuff, but regular working people going about their lives and doing the best they can to wade through the tax laws aren't going to incur large, scary penalties. At least that's been my experience.

[cairee]

Edit: Don't get all worked up about the mention of penalties. I know the IRS tries to be all scary and stuff, but regular working people going about their lives and doing the best they can to wade through the tax laws aren't going to incur large, scary penalties. At least that's been my experience.

true on the canadian side also!
DH had a rather large debt to the CRA (Canadian version of the IRS) and when he phones to arrange a payment plan the woman on the other side was telling him he would have to try all other avenues first, applying for a loan from the bank, getting a credit card increase, selling our home! he called again the next day and that person just asked a few questions about our month to month finances and came up with a reasonable payment plan. such a difference.

[Serinde]

[Allyn]

....DH had a rather large debt to the CRA (Canadian version of the IRS) and when he phones to arrange a payment plan the woman on the other side was telling him he would have to try all other avenues first, applying for a loan from the bank, getting a credit card increase, selling our home! he called again the next day and that person just asked a few questions about our month to month finances and came up with a reasonable payment plan. such a difference.

Exactly. It sounds like the first woman got a little overzealous with her "The Caller Wants to Make Installments" flowchart.

[stitchingmae]

that is why DH and I alway have ourselves as single claiming 0 with our company and then of course married with one when we file. They hold out more but we are at less of a risk owing at the end of the year.

I had a friend who changed her with holdings in like november...and was cashing out some personal time and did this "just" for that one check so that she would get more of the money and not so much would be taxed. (it would have evened out in the long run as she too normally kept it single claiming 0 and got a refund...she was just doing this early LOL) well...she forgot to change it back. luckily it was only a couple of months but that changed caused her refund to be half of what it normally is LoL.

Supposedly if you change your with holdings a lot during the year it can flag for an audit. also if you put that you have more than like 10 during the year and then claim less at the end it can flag one as well.

The theory is you can list as however you want, but when it comes time to file, then you will end up owing. I think they added the fee in, I guess to make sure people don't claim a whoel bunch during the year and then drop down to normal when they file.

I have always had good luck with H and R we know the lady that owns the franchise in our town and her and they have always gotten us more back than anyone else, plus i like that they cover you in an audit. My BIL had an individual doing his taxe got an audit they auditied a total of 4 years i think ugh makes me sick to think about an audit. that is why we don't do all those special deducuctions like uniforms for work. The lady at HR says we could use our cell blls since we take call and use our uniforms and mileage to work....but it just isn't worth the risk to me LoL

[stitchingmae]

And yes, they can penalize you for overpaying if you purposefully overpay to get a big refund. They don't want to be used like a savings account.

Edit: Don't get all worked up about the mention of penalties. I know the IRS tries to be all scary and stuff, but regular working people going about their lives and doing the best they can to wade through the tax laws aren't going to incur large, scary penalties. At least that's been my experience.

LoL you made me a bit nervous with the overpaying fee, there is actually not a fee for overpaying..I panicked and had to look it up. Why would someone use that as a savings account lol you get more interest with a bank. The ONLY reason we leave ours the way we do, is so that we don't have to worry as much about getting hit with a HUGE payment when we file.

[Mystonique]

I pay more than required every week by not claiming various exemptions but I bought a new car with my tax return last year ... so I'm a happy camper.

When I bought my house I looked seriously into whether I would be better off paying the minimum tax and putting the extra I pay each week into my home loan but when it was all said and done the saving was so minimal that I prefer not to get a nasty shock from a tax bill.

[Allyn]

LoL you made me a bit nervous with the overpaying fee, there is actually not a fee for overpaying..I panicked and had to look it up. Why would someone use that as a savings account lol you get more interest with a bank. The ONLY reason we leave ours the way we do, is so that we don't have to worry as much about getting hit with a HUGE payment when we file.

It isn't a joke. I was told that by an accountant --who apparently knew about it first hand -- who was also quick to add that I need not worry because I don't make near enough money to to even come close to that being a problem. I can't imagine that ordinary people would have enough money to live on if they overpaid that much each week, though. You'd have to have *a lot* of additional money withheld over and above claiming Single-0 (which is the most money you can have withheld without going into the additional withholding.) We're talking about five-figure refunds, I'd imagine. Stop fretting about it. You're fine. No scary IRS agent is going to come after you.

And why are you filing only Married-1? You should be filing Married-2 on your taxes. (and, of course +1 for each offspring)

...she forgot to change it back. luckily it was only a couple of months but that changed caused her refund to be half of what it normally is LoL.

That really doesn't make sense. The best scenario is to break even. . .not to give them a bunch of your money so they can give it back to you next year.

Think about it. Getting a refund is really just getting your own money back. It's like going into the store to buy a pack of gum and giving the clerk a dollar and getting 50 cents back. . . but wait. . if you give the clerk five dollars, you'll get a $4.50 back. And if you give the clerk ten dollars, you'll get a really big refund -- $9.50 back. But the amount you owed stayed the same. You're just waiting a year to get your change.

[curly sue]

I have understood it that if you over with hold that you can be penalized. Allyn's explanation makes sense to me.

[PRW]

We have received refunds for years. My husband would rather have more taken out than have to pay. We have NEVER been penalized! We have used Turbo tax, HR Block and an accountant throughout the years.

[backafteradozenyrs]

...Getting a refund is really just getting your own money back. It's like going into the store to buy a pack of gum and giving the clerk a dollar and getting 50 cents back. . . but wait. . if you give the clerk five dollars, you'll get a $4.50 back. And if you give the clerk ten dollars, you'll get a really big refund -- $9.50 back. But the amount you owed stayed the same. You're just waiting a year to get your change.

Except when a family has children...the EIC can be as much as $6k (or in the past that was so, I didn't even look at the EIC charts this year) which is NOT your money until you file for your return & it's in the refund (if that's the scenario for you)

[Allyn]

We have received refunds for years. My husband would rather have more taken out than have to pay. We have NEVER been penalized! We have used Turbo tax, HR Block and an accountant throughout the years.

Just getting a refund doesn't mean you are grossly overpaying. If you stay within the confines of the W-4 form on your withholdings, you won't overpay that much.

Geez, forget I even said anything.

[Allyn]

Except when a family has children...the EIC can be as much as $6k (or in the past that was so, I didn't even look at the EIC charts this year) which is NOT your money until you file for your return & it's in the refund (if that's the scenario for you)

But that's something different and outside of what I was talking about. Yes, sometimes a refund isn't all your own money. I was talking about claiming fewer or zero exemptions just so you'd get a bigger refund.

[backafteradozenyrs]

Allyn, I was only trying to give a (common) scenario where someone does get a refund & it is not funds that had been with held from their paycheck.

No biggie, just trying to noodly my way around all this new stuff.