Tax Questions - 2007 - post them here!!!

[hotcouponmama]

Pack away the Christmas ornaments - it's tax season! Oddly enough, I really do like to get my taxes filed, cause it lets me file away lots of paper!

Got a question about your 2007 taxes? Post them here...and one of us may be able to help point you in the right direction! We'll use this thread as one big tax help section for the board!

I have more of a hypothetical question. My boyfriend and I both went onto Taxcut and H&R block to get an estimate of what our refunds would be because we haven't received all of our paper work yet. Well we almost fell over when he did his.

He makes about $50K a year. They took out close to $6800 in federal alone last year and he claims 0. When he put his info in, it says he will OWE more money. How on earth can this be possible!!??

I just don't get it :(

[hotcouponmama]

Originally Posted by Cin42382 I have more of a hypothetical question. My boyfriend and I both went onto Taxcut and H&R block to get an estimate of what our refunds would be because we haven't received all of our paper work yet. Well we almost fell over when he did his. He makes about $50K a year. They took out close to $6800 in federal alone last year and he claims 0. When he put his info in, it says he will OWE more money. How on earth can this be possible!!?? I just don't get it :(

Based on what you shared, it's very possible, but I doubt he will.

I am going to assume your BF doesn't have a house or much in the way of student loans or any kids....those are all good tax deductions. Also, if he isn't big on donating to charity, etc. Also, if you live in a state with personal income tax...that can affect things too.

Based on the numbers you shared...

50K
<5350> Single deduction
<3400> personal exemption
_______
41, 250 (adjusted gross income)

That has him in about the 20% tax bracket, which is right about $6800.

If he had things like mortgage interest and student loan interest to deduct, then it would lower his tax consequence and he'd get a return. I'd be surprised though if he really winds up owing, and if he does, I can't imagine it will be much more than he already paid in. Plus, if you do have a state income tax, you should be able to deduct that from the gross wages, which will also lower the federal adjusted gross income.

Originally Posted by hotcouponmama Based on what you shared, it's very possible, but I doubt he will. I am going to assume your BF doesn't have a house or much in the way of student loans or any kids....those are all good tax deductions. Also, if he isn't big on donating to charity, etc. Also, if you live in a state with personal income tax...that can affect things too. Based on the numbers you shared... 50K <5350> Single deduction <3400> personal exemption _______ 41, 250 (adjusted gross income) That has him in about the 20% tax bracket, which is right about $6800. If he had things like mortgage interest and student loan interest to deduct, then it would lower his tax consequence and he'd get a return. I'd be surprised though if he really winds up owing, and if he does, I can't imagine it will be much more than he already paid in. Plus, if you do have a state income tax, you should be able to deduct that from the gross wages, which will also lower the federal adjusted gross income.

That calms my nerves a bit. Thanks so much. We don't have a house yet, no kids, and he doesn't have any education loans so no deductions. We do have a state income tax (gotta love Jersey) so I hope that will at least cancel out anything he may have owed.

Doesn't it just seem like sometimes we are working for other people lol.

Thanks a bunch. Repped you.

[hotcouponmama]

Originally Posted by Cin42382 That calms my nerves a bit. Thanks so much. We don't have a house yet, no kids, and he doesn't have any education loans so no deductions. We do have a state income tax (gotta love Jersey) so I hope that will at least cancel out anything he may have owed. Doesn't it just seem like sometimes we are working for other people lol. Thanks a bunch. Repped you.

My inside family joke (because my mom never worked a day in her life, and it wasn't really to stay home and take care of us) is a bumper sticker on my fridge all about working harder for other people.

I do have a few other suggestions...

If your BF's company has any kind of pretax accounts, he can lower his taxes for 2008 by investing in a 401K or a flex spending account for medical. Also, if he has the cash, it might be worth putting money into a traditional IRA which will lower his taxes for this year, and might actually get him a deduction. He has until April 15th to put the money into an account. It might very well be worth putting the money away to get some of the money back.

Originally Posted by hotcouponmama My inside family joke (because my mom never worked a day in her life, and it wasn't really to stay home and take care of us) is a bumper sticker on my fridge all about working harder for other people. I do have a few other suggestions... If your BF's company has any kind of pretax accounts, he can lower his taxes for 2008 by investing in a 401K or a flex spending account for medical. Also, if he has the cash, it might be worth putting money into a traditional IRA which will lower his taxes for this year, and might actually get him a deduction. He has until April 15th to put the money into an account. It might very well be worth putting the money away to get some of the money back.

That's a great idea. I will have to ask him about it. I know he was thinking about a ROTH IRA. I honestly know nothing about IRA's, so I told him to do research about it. I think ROTH is after taxes? So the traditional would be better I would assume.

Thanks so much

[hotcouponmama]

Originally Posted by Cin42382 That's a great idea. I will have to ask him about it. I know he was thinking about a ROTH IRA. I honestly know nothing about IRA's, so I told him to do research about it. I think ROTH is after taxes? So the traditional would be better I would assume. Thanks so much

Yep - at his income level and facing a tax bill, he's better off with a traditional IRA. Roth is after tax. That's not to say he can't do a Roth for '08, but if he puts $4K in a IRA by April 15th, and he's in the 20% tax bracket, it will less his tax bill by about $800. So really, he's only putting in $3200 if he gets the $800 back.

[Tiffany]

Originally Posted by Cin42382 I have more of a hypothetical question. My boyfriend and I both went onto Taxcut and H&R block to get an estimate of what our refunds would be because we haven't received all of our paper work yet. Well we almost fell over when he did his. He makes about $50K a year. They took out close to $6800 in federal alone last year and he claims 0. When he put his info in, it says he will OWE more money. How on earth can this be possible!!?? I just don't get it :(

It's because he is claiming 0. He is getting most of his money back every week in his paycheck. He should be claiming 1.

Originally Posted by Tiffany It's because he is claiming 0. He is getting most of his money back every week in his paycheck. He should be claiming 1.

I thought when you claim 0 it takes the most out of your paycheck?

[hotcouponmama]

Originally Posted by Cin42382 I thought when you claim 0 it takes the most out of your paycheck?

I think 0 = more money out.

We claim married 10 and get just about no money taken out at all.