Owing Taxes is a hard pill to swallow.

Every year my tax refund has gotten smaller and smaller. I knew eventually I would have to adjust my W4 or increase my 401k contributions but this year was shocking. I owe more than 5k and realized the tough understanding of progressive taxes. Not only do I pay more now but all the credits I used to be able to take, now are completely gone. I understand that at the end of the day, complaining about making too much is a good thing but man it doesn't it feel like it right now. Have you guys had to deal with this as your progress in your career? What advice do you have to avoid paying so much at the end of the year?

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paul78

Mitechniq wrote: »

Have you guys had to deal with this as your progress in your career?

Yup.

Mitechniq wrote: »

What advice do you have to avoid paying so much at the end of the year?

I don't try to avoid. Not sure where you live - I live in the US where the tax rate is still one of the lowest in the world for the services provided.

joelsfood

Just fix your W4 and be done with it, certainly no point in complaining, as you have no one to blame but yourself. If you're not sure how much you should adjust it, use the IRS withholding calculator, freely available and relatively simple to use.

https://www.irs.gov/individuals/irs-withholding-calculator

Besides, it's better to pay than to give away an interest free loan.

DatabaseHead

I usually net out pretty close to 0 every year (give or take a couple of hundred). I don't want to own anything nor do I want anything back.....

dave330i

My W4 is at 0 and I still owe end of the year. Max out your 401k, setup 529 if you have kids and enroll in IRA if you qualify.

SephStorm

Had to do it this year because I had 2 jobs making good money and I guess I didn't have the right withholding, from now its zeros all around, I can deal with them taking out too much, but owing is never cool.

Besides, it's better to pay than to give away an interest free loan.

Is it? If you pay too much eventually you get back money you hadn't budgeted for. Lets just say theoretically that I had overpayed 5000 and was getting that back. That is an extra 5000 that can go to savings or a vacation fund, w/e. Its extra. But if I got it during my paychecks during the year, yes it would have accrued minimal interest during the year (the amount gained is soo low...) but realistically it would have been spent somewhere. I just payed off my last significant credit card debt, if I were getting that money back, i'd be halfway back to refilling that hole in my savings.

Dakinggamer87

Yup mutiple times lol... no fun

I keep increasing my charitable donations, church tithing to minimize my owed taxes. I also contribute to retirement accounts such as the 401k/IRA but those are maxed for me... so not much I can do there. I'm expected to owe $2,000-$3,000 ugh... I rather owe tho then let the government get an interest-free loan.

cyberguypr

You should be checking that W4 regularly to avoid surprises. Everyone's situation is different. My biggest fear is owing. I am the guy who does not care about the famous "interest free loan to .gov" so I claim zero exceptions plus additional fixed percentage withholding. It works beautiful for ME. Do whatever puts you wherever you want to be, but do something.

Dakinggamer87

@cyberguypr: Yea for sure after my debts are taken care of I'll likely readjust my withholding lol..

shodown

I pay taxes quarterly and I still end up paying 30K+ in taxes. I write off everything, and try to track as much as I can, but it does have it perks. To lower your tax bill try to find anything you can write off and keep good records of everything. See if your state offers rebates for certain purchases is another good one.

TheFORCE

I will have to pay off taxes this year for the first time. Not a big deal but that money would have beem deducted from the regular paycheck through out the year.

Danielm7

SephStorm wrote: »

Is it? If you pay too much eventually you get back money you hadn't budgeted for. Lets just say theoretically that I had overpayed 5000 and was getting that back. That is an extra 5000 that can go to savings or a vacation fund, w/e. Its extra. But if I got it during my paychecks during the year, yes it would have accrued minimal interest during the year (the amount gained is soo low...) but realistically it would have been spent somewhere. I just payed off my last significant credit card debt, if I were getting that money back, i'd be halfway back to refilling that hole in my savings.

Just two schools of thought. I try to come as close as even as I can at tax time. I also don't think most of us would really earn all that much interest if you held the money in savings all year. Even if you paid 25K in a year of taxes and held all of it in a 1% savings account, which most people don't even get in the first place, you're talking a differences of a couple hundred dollars, not really the end of the world.

But, if you're paying off CC debt with it you can end up paying a lot more. Say you owed the 5K you mentioned in credit card debt at an average of 15% interest and you waited all year for the refund to pay it off you could have just taken that $400+ a month extra and pay the CC off during the year saving a lot of the interest.

Rant mode off, I realize most of you already know this. I was just surprised to find out a coworker, who is paid well and seems to always be scraping for money to get by gets a 12K tax refund, the whole situation was just weird to me. He even has to take a 401K loan and stop contributions as he gets close to the end of the year just so he can get by until refund time.

thomas_

Start a business of some sorts.

jeremywatts2005

I usually try to get mine to zero. What really sucks is that I make more money at my current company and my take home is less. I have to wait for my bonus to actually make more money. My take home dropped almost 9K a yr because of medical insurance is literally that much at my employer. I have a daughter that is autistic and I have to pay $400 a month for the insurance premium and $600 for the HSA so I have enough to pay out of pocket for medical expenses. This yr I actually got back $1500 because I was killed so badly on medical. I hope I get a good pay raise and a huge bonus because I cannot work for less money. Luckily in Texas, we do not have state taxes but my property tax is near, $1000 a month, though. Which really hurts also and is another reason for me getting a federal return.

Trucido

Im getting $7 back on my federal and about $150 in state. WTH?

chrisone

I know I am going to have to pay this year. I adjusted my w4 7 months after the start of the calendar year

My fault so I just know I have to pay now.....doH!

jelevated

Try being the only one in your extended family who isn't eligible for EITC by a wide margin. Jelevated, why aren't you balling around tax time? Didn't you get your $7000-$9000 "refund" back from the govt like the rest of us?

The mindset is pervasive.

TacoRocket

While I understand your situation may not be ideal you should really be looking at your allowances. The IRS provides a nice calculator. Even with a progressive tax systems there are still ways to lower your taxable income. If this is a concern for you, paying a CPA $400 to take a look at stuff and offer adjustments is not a a bad idea. Seeing that you're paying 5k. Which by the way something doesn't seem right.

Mitechniq wrote: »

Every year my tax refund has gotten smaller and smaller. I knew eventually I would have to adjust my W4 or increase my 401k contributions but this year was shocking. I owe more than 5k and realized the tough understanding of progressive taxes. Not only do I pay more now but all the credits I used to be able to take, now are completely gone. I understand that at the end of the day, complaining about making too much is a good thing but man it doesn't it feel like it right now. Have you guys had to deal with this as your progress in your career? What advice do you have to avoid paying so much at the end of the year?

Mitechniq

paul78 wrote: »

Yup.
I don't try to avoid. Not sure where you live - I live in the US where the tax rate is still one of the lowest in the world for the services provided.

I by any means am not trying to scheme the system, I know as a US Citizen and an Air National Guard Officer of 17 years - I have a civil duty to pay my 'fair' share of taxes, even when I don't always agree on how it is being spent. The intent of my last sentence was more on how do I distribute my taxes throughout the year and reduce the amount I have to pay during tax season.

I also wanted to shed some light on how funny perspective can be, years ago I vowed I wanted to make the money I am making currently, but I actually don't feel any richer than before. I received a 30 percent raise, but with the increase in my 401k and paying more taxes, my effective take-home pay went up 14 percent. Sure my 65-year-old self will be happy with the amount of money I am saving for retirement, but my life and in particular, the stock market are never a guarantee.

I did a calculation on what my taxes for 2017 should be and will track my tax contributions monthly. I built a formula an excel to let me know if I am in the right direction or falling behind. Hopefully, that will get me close to 0 or a small refund at the end of the year.

TacoRocket

Ill say it again. You need to talk to a tax professional about what is going on. They should be able to tell you exactly why you owe taxes and ways to reduce your tax burden.

While you have a civic duty to pay your taxes you also have a duty to not pay taxes if you can legally avoid so.

Please talk to a tax professional in your area.

Mitechniq wrote: »

I by any means am not trying to scheme the system, I know as a US Citizen and an Air National Guard Officer of 17 years - I have a civil duty to pay my 'fair' share of taxes, even when I don't always agree on how it is being spent. The intent of my last sentence was more on how do I distribute my taxes throughout the year and reduce the amount I have to pay during tax season.

I also wanted to shed some light on how funny perspective can be, years ago I vowed I wanted to make the money I am making currently, but I actually don't feel any richer than before. I received a 30 percent raise, but with the increase in my 401k and paying more taxes, my effective take-home pay went up 14 percent. Sure my 65-year-old self will be happy with the amount of money I am saving for retirement, but my life and in particular, the stock market are never a guarantee.

I did a calculation on what my taxes for 2017 should be and will track my tax contributions monthly. I built a formula an excel to let me know if I am in the right direction or falling behind. Hopefully, that will get me close to 0 or a small refund at the end of the year.

blargoe

My goals with respect to reported taxable income are

- Get MAGI down to the point where I can get the full child tax credits (I have 3 kids)
- Get taxable income down to 15% bracket if possible (I'm the only income, married filing jointly)
- Aim for as close to 0 refund as possible and put the "extra" money that was mine to begin with in a retirement or other investment account as soon as possible rather than waiting for April of the following year.

In doing the above I am contributing to the company match in my 401K, plus some additional got get MAGI lowered, then contributing to IRA's, then finishing maxing 401K.

This year my numbers were way off on the refund side (got a huge refund) because I had two mortgages part of the year, and with church donations I had a large amount for deductions, and for the first time we were able to max our IRA's. I think I upped my W4 to 14 for this year.