It looks like I am going to owe 5 times more federal income tax when filing for 2009 than what I owed for 2008. Why? Turns out they (the employer) has been withholding less federal tax on each paycheck even though my exemptions/allowances were same for both years. So, I got a bit more on each paycheck, but now I owe much more. Not that I can't pay it even now, but still. So, I wonder, may this be true for most taxpayers for 2009? Is there going to be a mass of people finding out they owe much more federal (and maybe state) tax to settle up for 2009 than for 2008? If so, that would be very sad given the economy. And if it's because what I think it is, the government messing with the tax rates, what a poor choice on their part. Or not, don't really know at this point. The tax rate in the tables looks similar when spot checking. Chime in.
Most people won't be affected, but there is a niche of people who are in that bump on the curve. The withholding tables were adjusted earlier this year as part of the stimulus so that people wouldn't have to wait until 2010 to get money back. And if you recall, things were looking pretty dark back in March...
Did you claim the Making Work Pay credit? That was the basis of the adjusted withholding. If you forgot to figure that in, maybe that is the discrepancy?
I think most people think about this in the wrong way - they think a big refund is great - that means that the government has been holding your money at no interest. You are better off owing money in April as long as it isn't so much that you pay a penalty - that means that you had some of the gov't money and you can put it in the bank and collect interest while waiting for tax time. Of course this doesn't apply to me since I'm unemployed - thanks for supporting me last year. :madgrin:
I know my fed withholding went up my first paycheck of this year. That must have been the revert back to the old tax tables?
(BOLD ADDED) RIGHT!! The bank pays so little interest these days I would get more enjoyment having the cash on hand and using it to play Monoply .... obviously joking, but the interest rate is below dismal.
Bah, ya'll are lucky. My employer is switching payroll systems, and in order to rid themselves of any hassle of dealing with moving funds around, they paid us 27 pays in 2009 instead of the usual 26. This means, that effectively I got a pay raise (in the eyes of the IRS) when in reality, I had none. The difference was getting paid on 12/31 vs getting paid on 1/1. Wait a pain in the nice person... The last two years I adjusted my withholdings so as to not pay any extra, but this year I let it ride (we had twins, so in theory I would have gotten 2700 back). This stupid move by my employer means that I now owe the state money, and am getting back 50 from the feds... oh and they decided to NOT take any federal taxes out on that "extra" pay... yay.
I do not typically get a refund. My tax liabilities for this year have increased, but I also had some significant increases in property taxes on my schedules soooo, maybe that will offset the new number Uncle Sam wants out of my pocket. Last year we had less than $600 we had to pay when we had Don work up our returns... With the new RE we got... I'm sure my bill from Don is going to go up too.
In theory, you're quite right. But in reality, most people would have spent the difference instead of investing it, and a refund is preferable to having to pay a big chunk. Think of it as a forced savings plan.
I'm another one of the people who strives to never have a refund, intentionally planning to pay in April. But due to the mass layoffs very early last year, and not qualifying for UI, I'm getting all my withholding refunded. And more, thanks to the Making Work Pay credit. At least I'm back to work again, though just work three days before the end of the last pay period.
Many DO think that way... My coin jar earns as much as any refund ever has... Hmmmm... Soooo... I really have multiple savings plans... My Santa Saver... (which I use for EOY taxes and insurance payments) My Regular Checking/Savings account... (which I use as a transfer account to my kids when they need it) My Secondary Checking/Savings account... (which I use for holiday spending) My Coin Jar... (which I use for my "car fund") My Slot Machine in the Bedroom... (which we use to give to graduating students in our family) My Coin Operated Telephone in the Telephone booth in the bedroom corner... (which is used once a year for a trip to Leatherbees) My Keogh... (which is not getting any more input until after I am out from under child support payments) My 401s... (not the other two my former wives own after the divorces) My IRAs... (not the one with the last ex that gets it) The 529 for B III... (I am hopeful he will change his mind and actually WANT to go to college) The safety deposit box... (that has some collectibles worth keeping) The house safe... (which has metals in rounds and bars, stamps, weapons, and a bit of crystals that many folks would find quite nice on a finger or necklace) And my art... (some of which is substantial and from noted individuals) I should probably include the dirt too... but since I have one mortgage to pay on for the four properties that have renters, it's probably not going to be considered a savings account as much as a revenue account.
i strive to be nearly even with the IRS at the end of the year. i check my withholding a few times a year to be sure i'm on track and adjust accordingly. learned that one the hard way after the university did not withhold ANY taxes from my first 5 paychecks when i started graduate school. sucks to get a big uneven balance at the end of the year, but it's not like you actually owe more.
