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Checked My Withholding

April 17th, 2008 at 02:49 pm

I double checked my withholding yesterday since I got my bonus.

I think we are claiming 12 allowances, I haven't changed it in a while. (Will probably have to start paring it down as we pay down our mortgage and get our medical costs a little more in control).

Anyway, I owed $1200 for last year - IRS. We did a ROTH conversion, and my attempts to see where I went wrong have failed. I can not find the papers where I figured our estimated taxes. However, I think I just pulled the ROTH numbers out of my head at the time and under-estimated them. Duh. It's all I could figure. As when I did my tax return the ROTHS were more than I remembered.

But yes, we took advantage and converted all our IRAs into ROTHS over the last 2 years, while we were in insanely low tax brackets.

Anyway, so with my bonus (which I rely on for much of my Federal withholding - or likewise, withhold a lot less the rest of the year because of the pesky bonus taxes).

I figured I am withholding $125 Fed every paycheck and the bonus withholding was $500.

It puts my total Federal income tax withholding at $3500 for the entire year.

If we don't have any medical expenses and have a lean charitable giving year, and if we have $1k in interest income, then this is rather breakeven for us. $3500 will be my taxes for the year. & this is a pretty aggressive guess. I am sure we will have plenty of deductions.

I withhold $50 every paycheck for state. Our state tax will be around $1k. So that is pretty breakeven too.

So I am happy where we are at. If we set up a HSA or if we have any medical expenses beyond our certain dental checkups, then our taxes will be slightly lower. But it's all pretty much in the realm of breakeven.

& that makes me pretty pleased that I don't have to rachet down my allowances.

I think that next time I get a big raise I will rachet down my allowances by 1. It's probably due and coming in the next couple of years (that I should up my withholding a tad). We have just been lowering and lowering our withholding the last few years as taxes have been very favorable to us. But I knew some day we'd have to go back in the other direction. Wink I think we have started reach a tipping point, as my wages increase too.

I can't think beyond this year because I wouldn't be surprised if the entire tax code is turned on its head next presidency. We enjoy some pretty insanely low taxes thanks to the Bush tax cuts. But I also know this can't last forever. I just don't take our current situation for granted. I don't expect it to last very long. Nor should it last very long. Though it has been an immeasurable help during our one-income years. I still can't help but feel I will have to pay this back tenfold down the road - all the breaks we have gotten the last few years. One look at the national debt keeps me thinking that.

------------------------------

In other news, we got approved for Family Camp on our second choice of dates. So we are going to Yosemite in mid-June. Yay!!! We are going with both of our parents so it should be fun. I paid for my dad to go. The least I could do after he took me to Japan. Wink Well, my mom doesn't do camping so she won't come along. Which is probably for the best, we'll have more fun. Big Grin I love my mom, but she doesn't travel well.

I think we will stay at camp 3 days and enjoy the leisure. But will probably trek into Yosemite proper one day and try out a easy hike for LM. We are staying 3 nights.

We have to figure out how far the drive is. Dh swears he's done it in a day and it's only 2 hours. (No way - I know it's farther). I thought it was more like 5 hours. I am starting to think it is in between. Maybe 3 hours?

I think, well, why don't we go up there more often then? It is something we want to do. It will be good to see how the kids do, and to introduce them to camping. I look forward to not having to cook or pitch a tent though. Everything is provided. Camping for lazy city people. Wink

We even got electricity in our tent which I don't know if it is necessary. I got it more in mind for dh and all his toys. BUT he actually said he wasn't planning on bringing any. Blow me over with a feather. (Thought he'd bring his PSP and DS2, and all that crap - if nothing else - to entertain the kids). So I am pleased that he can put all that aside for out nature trek.

(I just looked it up. 3.5 hour drive. 180 miles. Lots of windy roads so I will go with the 3.5 hour estimate).

Funny how dh and I were both way off - LOL. But it is a pretty manageable drive. Yes, we might just survive without all of our electronics. Wink

I really look forward to showing the kids the night sky in Yosemite. My second career choice would have been astronomer. So I have been excited to go spend a night away from the city lights. Rare treat for me... The most amazing thing about camping for me, is the shooting stars and the chance to glimpse the milky way. The kids will love it!

3 Responses to “Checked My Withholding”

  1. pretty cheap jewelry Says:

    we are lucky to have weekend property in the country, no lights (also here in CA, I'm not telling where!!). The stars, what can I say, no words, eh?

    Anyway, I also had a withholding problem this year. My job is part time, about 1/4 of our total income. I have maxed out I thought on withholdings on my paychecks. So how did we end up having to pay $1500 on income tax????

    Husband finally had an idea and figured it out. My employer doesn't 'see' that we really make a lot more money and my withholdings, are a too small percent of our total income. His main paycheck claims the typical with holdings for our little family of 4, but it doesn't also account for my fairly substantial (1/4th more) added income.

    To make matters a tiny worse, he also teaches at night for fun, but the income is good. So our combined income from 3 jobs is way too much for the withholdings we claim.

    He decided to set aside a few of those teaching paychecks just to pay taxes next year Frown

  2. noppenbd Says:

    The IRS has a withholding calculator that we used in 07 with great results. We ended up owing $160 so I think that is about as close as you can get. It will give you the number of allowances to put on each W4 and your estimated federal bill for the year.

    http://www.irs.gov/individuals/page/0,,id=14806,00.html

  3. scfr Says:

    Oh - Thanks for the reminder! We pay estimated taxes too, and we just pay the minimum of what we have to (based on the previous year's taxes). Now that I'm working I'm having some withheld, and I will need to adjust (reduce) my estimated tax payment to reflect that ... Just jotted a note on my calendar for the June 15th payment.

    Also, you reminded me of something I wanted to blog about.

    Thanks for the unintended reminders!

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