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[Taxes] Higher income = lower refund?
cj iwakura
The Rhythm RegentBears The Name FreedomRegistered User regular
The Rhythm RegentBears The Name FreedomRegistered User regular
Probably an immensely stupid question, but I actually have a decent job now that pays well, and I noticed my refund was drastically(like $600) lower than usual.
This is normal, right? I always self-file and prepare, so I figure I should stick with that regardless?
(I'm single, no dependents; 1040 EZ.)
If it wasn't for the $400 work credit thing, I'd owe money.
This is normal, right? I always self-file and prepare, so I figure I should stick with that regardless?
(I'm single, no dependents; 1040 EZ.)
If it wasn't for the $400 work credit thing, I'd owe money.
cj iwakura on
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Sometimes. How much did you make last year?
Line 4: $19,144.22.
Yeah, you're in the lovely sweet spot of not really getting shit back unless you're in school or have dependents or something along those lines. I made 21k on the books a few years ago and got a pittance for a refund.
If HR doesn't adjust for your previous job or prorate your taxes for the year then it really is a crap shoot.
You can eyeball your W2s with the following calculator.
http://www.moneychimp.com/features/tax_brackets.htm
you can easily make $20K and have to pay extra taxes when filing, or make 100K and get a huge refund
ideally, you should aim for a zero refund by filling out your W-4 to get the correct amount of taxes withheld from your paycheck... if you regularly get a refund, then you're basically giving an interest free loan to the gov't... it's your money that could be helping you out throughout the rest of the year rather than being 'gifted' to you when you file your taxes
That interest free loan stuff is for tax dodgers, it's usually a negligible amount. Maybe he's not eligible for an EIC in his state that was pumping that number up too. This is why tax laws are confusing.
Always shoot for the lowest refund you can pre-tax, obviously, but don't be surprised if that $100 turns into $1600 because you have student loans and a house.
So sad! The American average 3k refund is an extra 250 a month in income. While that would only earn you an extra 50 bucks a year in a high yeild savings account, it would have a serious impact on paying down high interest loans (credit cards, car payments, etc). Heck, I'd take the 50 bucks and my myself some new shoes.
As for the OP, I'd recommend a review of your W-4 just to be safe.
Like I said, before I factored in student loan interest payments, and other credits, my tax refund was $100, and I actually owed NYS 46 of it. So I was only taxed an extra $8 a month, if that, which if you get paid weekly is ~$1.92 cents overpayment. In essence "the loan." The people that get a ton back before they add that stuff in are doing it wrong.
I mean my refund was pretty close to that 3k, if I had had a house it would've been even higher, but I didn't pay too much.
I'm sorry to sound like a total and complete douchebag, but... you're doing it wrong.
With a 3k refund, you were taxed an extra 250 a month. Your weekly overpayment is about $115 bucks. The goal is to only pay tax on your taxable income. It's not cheating and it's not tax dodging to use the W-4 to your advantage. My tax refund was $6 (and I itemized all my school loans, mortgage interest, investments, etc). That 250 a month, for me, is my car payment. It's a pretty big deal.
You can yes, but you're better off just paying tax on your income, and not pre-guessing what you'll be paying on student loans, house interest, and other deductions.
If something so drastic happens that it's going to affect your withholdings for the year, then you adjust your W4.
You're using the government as a zero percent savings account. If the risk is so awful, take that money and put it somewhere else.
This isn't rocket science. You're not playing any risky fucking game by simply understanding your tax liability and properly planning.
I know people "like" having a refund, it feels good, but it's a 0% interest loan you gave to the government. I only got a refund this year (as opposed to the last 3 years) because it turns out taking two summer classes was completely refundable from the taxes I paid in. Huzzah!
So if you work full time, you should talk to whoever does your payroll so you get it straightened out correctly.
Though note, the Social Security tax rate was cut from 6.2% to 4.2% so we should all be getting a bigger paycheck as of 2011. I like the extra money!
edit: Bowen, why are you saying paying the correct amount of taxes is risky? It isn't even hard to calculate. Hand me anyone's paystub and I could do it in 5 mins with the free IRS calculators.
My work even sends a reminder every January to us to make sure the right amount is coming off our checks so we get more every week. You just fill out the form for the amounts you qualify for.
Especially when you start a new job - if you get used to your income at 0 deductions, then you don't miss it.
Does that make mathematical sense ? No - there are lots of ways to use that extra money and make a return on it.
Is life as cut and dried as Math? HELL NO. Your gonna blow that 50 bucks on Portal 2 - quit acting like your gonna stuff that cash in a IRA or a Savings Account.