Taxes Question....

[Softballkid]

Not sure where exactly to start this thread, so we'll go with here...


Wifey and I are getting our taxes done yesterday, I noticed our return amount is dramatically smaller than last year, which, to an extent, I fully understand because we didn't have all the deductions we did as the year before... Which, I am ok with...

Now, on to my question....


She switched jobs about halfway through the year in 2008, she got a "hit" because of this, we will say 5k for a number.

I didn't get the full run down reason as to why (wasn't there when this happened), but the simplified version was, when you start the year with job X, making XXX amount of dollars, your tax rate is set, say 5k. If you switch jobs, you still have to meet that 5k, plus whatever your new number is for your new salary, say that number is 6k.

So, before you can get any refund at all, you have to pay in 11k...

Has this happened to anyone else? Can anyone explain this to me in a simplified answer? Or where do I need to go to look into this (websites)..

Any info is appreciated, thanks!

 

[Pete]

I didn't clearly understand that but I think the answer is no. Your tax rate is only "set" by your AGI at the end of the year. If you go significantly up or down during the course of the year by changing jobs you need to fill out a W-4 to adjust the withholding.

 

[Aerogal]

I admit to being a bit confused on why (if someone else is doing your return) that they would make such a statement. Your witholding during the tax year is determined by your choices on the W-4 (you both might want to review yours for accuracy - your witholding should be listed on your current paystubs).
Your tax RATE is not determined until AFTER you finish your taxes and your AGI (Adjusted gross Income) is calculated.

I'm no expert but you might want to recalculate how much witholding you actually need. Personally I don't care if I get refund - that just means I've given the govt free money to spend on worthless programs where I could've used the cash myself.

 

[Softballkid]

I didn't clearly understand that but I think the answer is no. Your tax rate is only "set" by your AGI at the end of the year. If you go significantly up or down during the course of the year by changing jobs you need to fill out a W-4 to adjust the withholding.

I think what your saying is if say you got from making 30k a year, to 55k a year, your taxes will go up from say 3k to 5.5k type of deal..

If so, I understand that, but it seems what happened to us is it was added together, so instead of paying in a total of 2.5k more, we paid in say 8.5k.

If I'm on the same page as you...?

 

[Chasey_Lane]

SBK, try these withholding calculators.

2009 Withholding Calculator
https://interactive.marylandtaxes.com/business/calculators/WHCalc2009.asp

 

[awpitt]

Pete is right.

It doesn't matter how many jobs you hold during the year. In the end, you add up the income from the W2s and then subtract the deductions you have to get your taxable income which determines your income tax amount for that year.

Whether you get a refund or end up owing is determined by the amount of taxes that were withheld throughout the year and that's determined by how you fill out the W4 when you start a new job.

 

[Softballkid]

I admit to being a bit confused on why (if someone else is doing your return) that they would make such a statement. Your witholding during the tax year is determined by your choices on the W-4 (you both might want to review yours for accuracy - your witholding should be listed on your current paystubs).
Your tax RATE is not determined until AFTER you finish your taxes and your AGI (Adjusted gross Income) is calculated.

I'm no expert but you might want to recalculate how much witholding you actually need. Personally I don't care if I get refund - that just means I've given the govt free money to spend on worthless programs where I could've used the cash myself.

That's what Im trying to do, get info so I can figure out where to start looking

I am pretty sure she claims 1, and I claim 0, but i can double check that.

 

[Chasey_Lane]

If so, I understand that, but it seems what happened to us is it was added together, so instead of paying in a total of 2.5k more, we paid in say 8.5k.

If I'm on the same page as you...?

Have you looked at the federal and state tax tables for your combined income? This will tell you the amount of payroll taxes you will be required to pay during the year.

 

[Softballkid]

SBK, try these withholding calculators.

2009 Withholding Calculator
https://interactive.marylandtaxes.com/business/calculators/WHCalc2009.asp

I don't have our paperwork, I'll have to do this tonight...

Pete is right.

It doesn't matter how many jobs you hold during the year. In the end, you add up the income from the W2s and then subtract the deductions you have to get your taxable income which determines your income tax amount for that year.

Whether you get a refund or end up owing is determined by the amount of taxes that were withheld throughout the year and that's determined by how you fill out the W4 when you start a new job.

That's what I though, and that is why I am confused as to why we had such a big hit on her switching jobs..

 

[Softballkid]

Have you looked at the federal and state tax tables for your combined income? This will tell you the amount of payroll taxes you will be required to pay during the year.

I will def. look at all that when I get home today

 

[Chasey_Lane]

That's what I though, and that is why I am confused as to why we had such a big hit on her switching jobs..

If you used the same W-4 exemptions from the old job, without taking into consideration the new salary, you could owe more. You can't expect to pay the same taxes making $30K as you would $60K.

 

[Softballkid]

If you used the same W-4 exemptions from the old job, without taking into consideration the new salary, you could owe more. You can't expect to pay the same taxes making $30K as you would $60K.

right right right.. I understand that part..

We both got raises last year, so our tax bracket went up, so we pay out more taxes.. I understand that.

I don't understand as to why/where this "added" together number came about.

 

[Chasey_Lane]

I don't understand as to why/where this "added" together number came about.

I don't think anyone does, and possibly your tax person didn't clarify what they meant. Call and ask 'em so you're not feeling jaded.

 

[Aerogal]

I think I understand your confusion.
The way our tax rates work is this - the more money you make - the higher your tax RATE is. Everything following is examples, I'm not an tax expert but maybe this'll help.

Lets say that you file jointly and your total AGI (after deductions) is 30K, your tax RATE will be 7% (I don't know the real tax rates but this is an example).
Next year your change jobs, get a promotion, et.. and your AGI goes up to 60k, then you tax RATE will increase to 9%.
The more your have the as an AGI, the HIGHER the percentage of your income is taxed. Our taxes are based on an income level system, not a straight percentage.

Here comes the whopper - There's a ceiling on tax rates. IF your AGI is over the amount of allowable tax rate of (lets say) 15%, all income over that amount is taxed at 28%. Let's say your AGI is 150K (yeah - if only), and the tax ceiling is 100K. You would be taxed at 15% up to the 100K. The additional 50K is taxed at 28%. I think the point where you have to calculate your own tax rate is when your AGI hits 250K.

This is why the tax laws suck. It just gets more confusing every year. Don't blame the IRS, they're the collectors. Congress writes the rules.

I hope you learn more about tax rates and witholding. .

 

[Softballkid]

I don't think anyone does, and possibly your tax person didn't clarify what they meant. Call and ask 'em so you're not feeling jaded.

I plan on that as well, everyone I am talking to at work about it seems to think she did something wrong, and I need to go through all my paperwork with a fine tooth comb, whic is sort of what I am gathering from here, so I plan on doing that tonight as well