Author Topic: "Doing your taxes"  (Read 3541 times)

0 Members and 1 Guest are viewing this topic.

ladyknight1

  • Super Hero!
  • ****
  • Posts: 8078
  • Operating the logic hammer since 1987.
Re: "Doing your taxes"
« Reply #45 on: June 04, 2014, 09:03:00 AM »
In the US, as part of hiring paperwork, the employee completes a form called a W-4, or withholding allowance certificate.

http://www.irs.gov/uac/Form-W-4,-Employee%27s-Withholding-Allowance-Certificate-1

On that form, the employee lists how many dependents they have and if they want additional money withheld. My DH's withholding is usually too low, and we sometimes have to pay a few hundred dollars to the Internal Revenue Service.

On our tax return, we get a deduction for my educational expenses, our minor dependent, charitable giving and our medical expenses. If we owned a home, we would get a deduction for that as well.

PastryGoddess

  • Super Hero!
  • ****
  • Posts: 5044
    • My Image Portfolio and Store
Re: "Doing your taxes"
« Reply #46 on: June 04, 2014, 09:33:53 AM »
In the US, as part of hiring paperwork, the employee completes a form called a W-4, or withholding allowance certificate.

http://www.irs.gov/uac/Form-W-4,-Employee%27s-Withholding-Allowance-Certificate-1

On that form, the employee lists how many dependents they have and if they want additional money withheld. My DH's withholding is usually too low, and we sometimes have to pay a few hundred dollars to the Internal Revenue Service.

On our tax return, we get a deduction for my educational expenses, our minor dependent, charitable giving and our medical expenses. If we owned a home, we would get a deduction for that as well.

Why doesn't he just change it?  You can change it at any time. Or do you not want to give the government an interest free loan for a year? :D

nutraxfornerves

  • Hero Member
  • ***
  • Posts: 2025
Re: "Doing your taxes"
« Reply #47 on: June 04, 2014, 11:05:12 AM »
Quote
Why doesn't he just change it?  You can change it at any time. Or do you not want to give the government an interest free loan for a year?

I think ladyknight is saying that they usually owe money at the end of the year. I try to keep things so that I come close to even--either I owe a few hundred or they owe me a couple hundred.

There are many things that can be used to either reduce your taxable income ("deductions") or reduce the amount of tax you owe "credits")

You can either use a specified flat amount for deductions ("standard deductions") or list everything you can find ("itemized deductions.") Younger people whose income is primarily a salary and who do not have children or own a house usually find that th standard deduction is better for them. People with complex finances usually itemize.

Examples of things you can deduct:
Contributions to a legally-defined charity: money, things you donate (e.g clothing), and even your cost of transportation to be a volunteer.
Business expenses not reimbursed by an employer. This can be travel, a home office, buying a uniform, computer equipment, your accountant's fees, paints (if you are an artist), cameras (if you are a photographer), guitar strings (if you are a musician), maintenance of your rental property, and many other things. This is very complicated and most people would need help.
Investment or gambling losses--but only up to the amount you made on the stock market or at the casino. So if I lost $1000 on the slot machines and won $500 at poker, I can deduct $500 of losses. This is also complicated, especially for stocks and other investments.
 Medical expenses, if they total more than a certain percentage of your income. This could include remodeling your house to accommodate a new disability, or feeding your service dog, as well as doctor fees, medicine, etc.
Alimony
Contributions to certain retirement investments.
Interest on your mortgage.
 Real estate taxes

There are many more. That's why it can get so complicatd.

Nutrax
The plural of anecdote is not data

PastryGoddess

  • Super Hero!
  • ****
  • Posts: 5044
    • My Image Portfolio and Store
Re: "Doing your taxes"
« Reply #48 on: June 04, 2014, 11:13:06 AM »
Quote
Why doesn't he just change it?  You can change it at any time. Or do you not want to give the government an interest free loan for a year?

I think ladyknight is saying that they usually owe money at the end of the year. I try to keep things so that I come close to even--either I owe a few hundred or they owe me a couple hundred.

I know what she was saying.  That's why I asked the question.  You can change your withholding at any time during the year. 

I was asking why not change it so that more money is withheld each paycheck.  And then I realized that maybe they don't want to give the government an interest free loan and prefer to send the gov't money when THEY are ready to do so.  :)

Dindrane

  • Super Hero!
  • ****
  • Posts: 15430
Re: "Doing your taxes"
« Reply #49 on: June 04, 2014, 11:15:56 AM »
I think in general, there are different philosophies about how to provide monetary assistance to those in need, and how to incentivize certain things that the society as a whole finds desirable (like home ownership). One way is to just give people money directly if they can demonstrate they qualify for a need-based program, or give them money directly if they can demonstrate they did some desirable thing that has been incentivized. Another way is to give people a break on their taxes for either or both of those situations.

Different countries do things different ways, but I think the US more or less goes the "break on their taxes" route. It has its pros and cons, but it's part of the reason why even regular people with relatively uncomplicated finances can find filing their taxes to be a bit of a daunting task.

If you're using the standard deduction that nutrax described, and your only source of income is a paycheck, filing your taxes probably takes approximately 15 minutes to do electronically once you have all the paperwork, and not too much longer to do on paper if you can use the "EZ" forms. But if you itemize your deductions or have a circumstance that precludes your using the "EZ" version of the form, it gets more complicated and takes more time, and there are more ways that you can get it wrong.

I own no property, have no children, get all but a tiny portion of my income from a paycheck, and use the standard deduction, and even I have taxes just complicated enough that I can't use the EZ form. I use the free version of TurboTax to file my federal taxes, so that part of filing my taxes is still very quick and easy. My state actually did away with their "short" form awhile back, which is part of the reason why filing my state income taxes has become such a pain. I have to go through 2 pages worth of questions even though 75% of them don't apply to me, which also means going through about a 100 pages of instructions to catch the ones that do. So it's now worth it for me to pay TurboTax to file with the state as well.


nutraxfornerves

  • Hero Member
  • ***
  • Posts: 2025
Re: "Doing your taxes"
« Reply #50 on: June 04, 2014, 11:18:32 AM »
Quote
I know what she was saying.  That's why I asked the question.  You can change your withholding at any time during the year. 

I was asking why not change it so that more money is withheld each paycheck.  And then I realized that maybe they don't want to give the government an interest free loan and prefer to send the gov't money when THEY are ready to do so.

Ahh. I misunderstood. I thought you were talking about hte common error of overwithholding as a "savings plan."

Nutrax
The plural of anecdote is not data

gollymolly2

  • Hero Member
  • ***
  • Posts: 2683
Re: "Doing your taxes"
« Reply #51 on: June 04, 2014, 11:27:56 AM »
Quote
I know what she was saying.  That's why I asked the question.  You can change your withholding at any time during the year. 

I was asking why not change it so that more money is withheld each paycheck.  And then I realized that maybe they don't want to give the government an interest free loan and prefer to send the gov't money when THEY are ready to do so.

Ahh. I misunderstood. I thought you were talking about hte common error of overwithholding as a "savings plan."

To each their own. :) You see it as an error, I see it as my annual vacation fund.

Most of the people I know who talk about "interest free loans to the government" wouldn't have put that extra couple hundred or thousand dollars in an account generating meaningful interest anyway, but your experience may differ.
« Last Edit: June 04, 2014, 11:32:11 AM by gollymolly2 »

ladyknight1

  • Super Hero!
  • ****
  • Posts: 8078
  • Operating the logic hammer since 1987.
Re: "Doing your taxes"
« Reply #52 on: June 04, 2014, 01:46:15 PM »
Quote
Why doesn't he just change it?  You can change it at any time. Or do you not want to give the government an interest free loan for a year?

I think ladyknight is saying that they usually owe money at the end of the year. I try to keep things so that I come close to even--either I owe a few hundred or they owe me a couple hundred.

I know what she was saying.  That's why I asked the question.  You can change your withholding at any time during the year. 

I was asking why not change it so that more money is withheld each paycheck.  And then I realized that maybe they don't want to give the government an interest free loan and prefer to send the gov't money when THEY are ready to do so.  :)

The bolded is why. Also, DH works for a small company, so things like tax withholding are more difficult to change than with a large company with a bookkeeper and human resources. The owner has to do it all.

miranova

  • Hero Member
  • ***
  • Posts: 2326
Re: "Doing your taxes"
« Reply #53 on: June 04, 2014, 02:43:15 PM »
Quote
I know what she was saying.  That's why I asked the question.  You can change your withholding at any time during the year. 

I was asking why not change it so that more money is withheld each paycheck.  And then I realized that maybe they don't want to give the government an interest free loan and prefer to send the gov't money when THEY are ready to do so.

Ahh. I misunderstood. I thought you were talking about hte common error of overwithholding as a "savings plan."

To each their own. :) You see it as an error, I see it as my annual vacation fund.

Most of the people I know who talk about "interest free loans to the government" wouldn't have put that extra couple hundred or thousand dollars in an account generating meaningful interest anyway, but your experience may differ.

Well that's not the only possible reason for not wanting to loan the government money.  Some people are barely scraping by, yet they get a huge refund every year.  These people might be better served by keeping more of their money every month, to pay the bills with, rather than taking a vacation each spring and struggling the rest of the year.

Personally, I don't loan anybody money, let alone interest free money, so why would I do that for the government?  I actually do invest a good bit of money but even if I just wanted my money to buy more scrapbook supplies, to me that would still be a good enough reason to hold onto it rather than loaning it away for a year.

shhh its me

  • Super Hero!
  • ****
  • Posts: 7041
Re: "Doing your taxes"
« Reply #54 on: June 04, 2014, 04:15:27 PM »
Quote
Why doesn't he just change it?  You can change it at any time. Or do you not want to give the government an interest free loan for a year?

I think ladyknight is saying that they usually owe money at the end of the year. I try to keep things so that I come close to even--either I owe a few hundred or they owe me a couple hundred.

I know what she was saying.  That's why I asked the question.  You can change your withholding at any time during the year. 

I was asking why not change it so that more money is withheld each paycheck.  And then I realized that maybe they don't want to give the government an interest free loan and prefer to send the gov't money when THEY are ready to do so.  :)

The difference between 3 and 4 dependents can be large , so even if it was the other way around (they were getting back a few hundred) someone may not want to have to write a several hundred check at the end of each year.

You can change it at any time  but that doesn't mean employers like to change it several times a year.