topic Re: Perfect Storm? in Get your taxes done using TurboTax

Perfect Storm?

Jlholzhae — Wed, 18 Mar 2020 18:53:34 GMT

I changed my withholding last year to Single 0, My wife changed her's to Married 0 -- Because we got hit with a 1,600.00 owe for both Federal and State. In the past, we usually got a refund. This year it jumped to 4,674? -- we just don't have that kind of cash available to meet this obligation. Did I do something wrong, seems like a big hit. The only thing I can think of it my soon to be 21 year old son, we no longer can claim as a dependant. My 23 year old daughter recently graduated from college in June and got married in August, we no longer can claim her or get the tuition credit. In addition, I received just over 4,000 from a retirement plan. Our income and adjustments were 153,759 taxable 129,359. Hard to believe we still owe so much. Any ideas or suggestions?

Re: Perfect Storm?

MinhT1 — Wed, 18 Mar 2020 19:13:20 GMT

It is very hard to explain the reason for this amount of tax due without actually looking at your return and your tax forms (W-2s, 1099-R, etc...).

One reason would be the tax (and eventually the early withdrawal penalty) on your retirement plan distribution if no tax was withheld.

If you are using TurboTax Online, you add TurboTax Live to have a tax professional review your return before filing.

Re: Perfect Storm?

Jlholzhae — Thu, 19 Mar 2020 02:30:07 GMT

Just as I thought -- "The Perfect Storm", I'm been teaching high school for over 25 years -- No breaks for me (not being able to itemize or take advantage of any exemptions), with the new tax law. My kids are grown now and we have no other exclusions nor deductions. I guess I needed to hire a tax accountant to maneuver through this, or start a business where I can exarate expenses and deductions.

Counted on Turbo Tax for many year and have been pleased with it, only to be blindsided in 2019. As a result we changed our withholdings, only to be devastated in 2020. Why do I need a tax accountant to take care of this? I'm fine with paying my fair share -- but this is too much. I have friends who are in business and can itemize, they joke about how much they can deduct, while I get the Standard Deduction, which is far less than my itemized deductions in past years. How is this fair? I work just as hard and so does my wife, what is fair?

Re: Perfect Storm?

AmyC — Thu, 19 Mar 2020 02:41:41 GMT

To clarify, friends with businesses write things off on their sch C or business return. 95% of America is using the new standard deduction. If your itemized deductions are higher, you should be using them.

Yes, the perfect storm. When things swapped over to the increased standard deduction, the W4 charts changed and everybody got bigger paychecks. That change in the W4 chart, did not help you. Your tax bracket did not change between the 2 years.

You should be gathering all income and checking federal withholding every 3 months when things are so turbulent. Adjusting your W4 to compensate for the changes throughout the year as needed.

I recommend using:

Congratulations on all the positive life events!

Re: Perfect Storm?

fanfare — Thu, 19 Mar 2020 04:20:23 GMT

Tax planning has to be done before the tax year is over, not after.

You may request an installment plan from the IRS if you can't pay by July 15th.

Re: Perfect Storm?

fanfare — Thu, 19 Mar 2020 04:22:59 GMT

Deducting expenses on Schedule C is not going to keep you from paying taxes if your business is making money.

Re: Perfect Storm?

fanfare — Thu, 19 Mar 2020 04:30:13 GMT

Now I see Trump wants to send you a thousand dollars.

Suggest you plan to return that to US Treasury by Tax Day.

What a joke.

Re: Perfect Storm?

Jlholzhae — Thu, 19 Mar 2020 13:45:29 GMT

Totally agree -- just never really had to worry about it before. Appreciate your response and to be honest, I do pay attention and was aware of the Tax Law changes, knowing that less would be withheld each paycheck, I even changed our withholdings thinking that would offset the amount that I owe, in the end, -- just didn't think it would impact us as much as it has. I've already used the IRS tax estimator as recommended by someone else and anyone reading these posts, and finding themselves in a similar situation, I suggest you do the same. I've always try to be proactive and not reactive, this just caught me unprepared and forced me to be reactive. I'll be fine, just a bit upsetting.