Anyone here good with taxes?

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Submitted by ibjames on March 5, 2007 - 8:54am

Would love to ask you some questions, my wife and I have recently married and have a few questions :D

Submitted by SD Realtor on March 5, 2007 - 10:40pm.

ibjames -

I think there is alot of good basic tax knowledge here. Throw them out there, get some feedback, then take you questions to a good CPA.

SD Realtor

Submitted by chewie83 on March 5, 2007 - 10:52pm.

If you are looking for someone to do your taxes for you, my wife is a tax attorney and can help file your taxes for you.

Submitted by FormerSanDiegan on March 6, 2007 - 10:10am.

I would suggest that you post your questions, rather than simply asking if there are experts out here. Many of us do not consider ourselves experts, but probably have experienced some of the same issues you have questions about. I for one think I am very good at paying way too much in taxes.

Also, if you ask specific questions, the answers can be reviewed by others and you can be saved from bad advice that way.

So, go for it. There are no dumb questions about taxes. Just dumb tax laws and rules to wade through.

Submitted by ibjames on March 7, 2007 - 8:33am.

My wife were recently married, this is our first full year as a married couple for taxes. When we did our taxes this year, we owe a pretty decent amount.

I have 1 selected for deductions and she has 0, when it's my income, we are fine but when we add another income it goes south fast. If we take off mine and just run with hers we are fine, but add mine and we owe, we go from something like an 1800 return to owing 2200. After state we are creeping towards 4k owed. OUCH!

Are we being dinged for being married w/o children?

Submitted by FormerSanDiegan on March 7, 2007 - 9:20am.

My wife were recently married, this is our first full year as a married couple for taxes. When we did our taxes this year, we owe a pretty decent amount.

I have 1 selected for deductions and she has 0, when it's my income, we are fine but when we add another income it goes south fast. If we take off mine and just run with hers we are fine, but add mine and we owe, we go from something like an 1800 return to owing 2200. After state we are creeping towards 4k owed. OUCH!

Are we being dinged for being married w/o children?

I don't think so.
There used to be a marriage penalty before a few years ago. But, tax brackets and standard deductions have been adjusted to reduce the impact of the "marriage penalty". The current standard deduction for married/filing joint is 2x the single standard deduction. Also the tax rates have been adjusted so that the income cut-offs for brackets to 2x single.

Not sure what you mean that you "have 1 selected for deductions and she has 0" ? Is this on your W-4 for withholding or what you enter into your tax software for exemptions ?

Are you saying that you owe 4000 more by being married rather than single ? Or are you saying that if you ignore your income you would owe 4000 less than if you include your income, but keeping everything else constant ? If so, are you still assuming that you are filing married or single.

I believe that you simply are not having enough taxes withheld from your paycheck. Look at your W-4 carefully. If you are a dual income family and each of you makes more than about 40K, when you fill out your W-4 look at the two-earner/multiple jobs worksheet. If you follow those instructions it will likely tell you that you need to claim 0, AND have additional money taken out of each paycheck.

Submitted by ibjames on March 7, 2007 - 9:39am.

That's what I'm thinking, I have to claim 0 and have additional money taken out :( I'm thinking of not doing this and just banking the money and owing at the end of the year also, kind of how we did it last year

Submitted by FormerSanDiegan on March 7, 2007 - 10:00am.

just banking the money and owing at the end of the year also, kind of how we did it last year

That's OK, but watch out for penalties, though.

You may owe penalties if you owe more than $1000.

You can avoid a penalty for underpayment of estimated taxes if you meet a "safe harbor" payment amount: the smaller of 90 percent of what is ultimately owed or a percentage of the taxes you paid in the previous year. If you make less than $150,000, the safe harbor is 100 percent of the previous year's taxes. If you make more than $150,000, the prior-year safe harbor percentage is more than 100 percent.
IRS Pub 505 for details.

Submitted by surveyor on March 7, 2007 - 12:06pm.

more deductions

No matter what, if you combine incomes, you will be subjected to a higher tax rate. Certainly having children can reduce your tax footprint, but you will still owe taxes more taxes due to your combined income. If you want to balance out the taxes you paid, you will have to use the Two Earner Worksheet at the back of your W-4.

My recommendation is to use more tax deductions, put more money towards your 401k (the max if possible, which is currently at $15000 each if I remember correctly), use your flexible spending accounts more aggressively, and find more deductions to use. Use the Two Earner Worksheet and account for the up to $30k worth of money you can put in your 401k and you might find that your taxes will improve.

(unless of course you have a job that does not have a 401k set up, where it gets harder...).

Submitted by avidsaver on March 7, 2007 - 4:59pm.

As Surveyor mentioned, look to your employer(s) to take advantage of possible tax-savings vehicles. The 401(k) is the best idea as you can reduce your taxable income quite significantly (today) without having to change your withholdings to zero. Also, if they offer a flexible spending account for health care, you can contribute to that. Just make sure that you don't contribute more than you'll actually spend on health care, because it's "use it or lose it."

Also, as someone mentioned (I don't remember who it was), make sure that when you do the comparison between what you would owe without the other spouse's salary, you're switching the filing status from married filing joint to married filing separately (which in my opinion is the worst filing status) so that you're comparing apples to apples.

If your company doesn't have a 401(k), you can consider contributing to a Traditional IRA to decrease your tax liability. The limit that you can contribute is lower than what you can in a 401(k) [401k is $15,500, IRA may be $4k or $5k??], but it can help too.

I hope that helps...

Submitted by ibjames on March 8, 2007 - 12:57pm.

Thanks alot everyone, I think we are going to up our 401ks and see what happens :)

I'm using software to do this? Where can I get this 2 income sheet?

Submitted by surveyor on March 8, 2007 - 2:15pm.

irs two income earner worksheet (W-4)

http://www.irs.gov/pub/irs-pdf/fw4.pdf?p...

Submitted by ibjames on March 9, 2007 - 9:03am.

thanks a million!

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