Author Topic: CBS Article - Millions of Taxpayers Could Wind Up Owing in 2018  (Read 2125 times)

PJS

  • 5 O'Clock Shadow
  • *
  • Posts: 11
CBS Article - Millions of Taxpayers Could Wind Up Owing in 2018
« on: September 11, 2018, 08:32:25 AM »
My wife stumbled across this article and sent it to me. For those who have some investment income and are planning on itemizing deductions, this might be worth a read.

https://www.cbsnews.com/news/millions-of-taxpayers-could-wind-up-owing-for-2018/

seattlecyclone

  • Magnum Stache
  • ******
  • Posts: 4525
  • Age: 34
  • Location: Seattle, WA
Re: CBS Article - Millions of Taxpayers Could Wind Up Owing in 2018
« Reply #1 on: September 11, 2018, 10:55:20 AM »
I expect we'll have the opposite problem. With AMT changes accelerating the refund of the tax we paid a few years ago on incentive stock options, and the increased income limit for the child tax credit, this new tax law will be giving us a bunch of money we don't really need.

trollwithamustache

  • Pencil Stache
  • ****
  • Posts: 579
Re: CBS Article - Millions of Taxpayers Could Wind Up Owing in 2018
« Reply #2 on: September 11, 2018, 11:58:20 AM »
its likely millions owe taxes every year...


oldmannickels

  • Stubble
  • **
  • Posts: 159
Re: CBS Article - Millions of Taxpayers Could Wind Up Owing in 2018
« Reply #3 on: September 11, 2018, 02:48:44 PM »
I've been seeing this in all kinds of people, the tax cuts are big, but the changes to paycheck withholding were bigger, so they'll end up owing come year end.

MDM

  • Walrus Stache
  • *******
  • Posts: 8782
Re: CBS Article - Millions of Taxpayers Could Wind Up Owing in 2018
« Reply #4 on: September 11, 2018, 04:24:53 PM »
The IRS has been banging this drum loudly and often, but it's not clear why.

E.g., from the linked article
Quote
Specifically, married taxpayers who itemize deductions, with two children under age 17, income exceeding $180,000 from one or more jobs and who have $20,000 or more in nonwage income (dividends, interest or capital gains) are highly likely to have to pay additional tax when they file next year.

Using $200K W-2 income and $20K interest income, a $500K 4% mortgage, and $5K in property tax for the example couple living in California, the 2017 federal tax would have been ~$32,957.

For the same situation in 2018, the federal tax will be ~$30,227.  The $4K Child Tax Credit more than makes up for the limit on state and local taxes for itemizing.

If the W-2 earner has "married with 3 allowances" on the W-4, there should be ~$600 refunded when filing.

oldmannickels

  • Stubble
  • **
  • Posts: 159
Re: CBS Article - Millions of Taxpayers Could Wind Up Owing in 2018
« Reply #5 on: September 12, 2018, 06:01:42 AM »
The IRS has been banging this drum loudly and often, but it's not clear why.

E.g., from the linked article
Quote
Specifically, married taxpayers who itemize deductions, with two children under age 17, income exceeding $180,000 from one or more jobs and who have $20,000 or more in nonwage income (dividends, interest or capital gains) are highly likely to have to pay additional tax when they file next year.

Using $200K W-2 income and $20K interest income, a $500K 4% mortgage, and $5K in property tax for the example couple living in California, the 2017 federal tax would have been ~$32,957.

For the same situation in 2018, the federal tax will be ~$30,227.  The $4K Child Tax Credit more than makes up for the limit on state and local taxes for itemizing.

If the W-2 earner has "married with 3 allowances" on the W-4, there should be ~$600 refunded when filing.

When I use the case study spreadsheet and have each spouse with a W-2 income of$100k, it says they are only withholding $8,739 per taxpayer for a total of $17,478. That means there's a deficit of around $12k

YoungGranny

  • Pencil Stache
  • ****
  • Posts: 548
  • Age: 28
Re: CBS Article - Millions of Taxpayers Could Wind Up Owing in 2018
« Reply #6 on: September 12, 2018, 07:06:03 AM »
I ran the numbers using the IRS calculator for my DH and I; it projects that we'll be about $11k short come tax time. Guess I don't mind having an interest-free loan from the gov't and glad I won't be surprised come tax season.

MDM

  • Walrus Stache
  • *******
  • Posts: 8782
Re: CBS Article - Millions of Taxpayers Could Wind Up Owing in 2018
« Reply #7 on: September 12, 2018, 10:51:54 AM »
When I use the case study spreadsheet and have each spouse with a W-2 income of$100k, it says they are only withholding $8,739 per taxpayer for a total of $17,478. That means there's a deficit of around $12k
Sure, if both are using "married with 3 allowances".

But that would likely(?) have caused a similar problem in 2017.  I don't have the 2017 withholding tables handy, but "adjusting for more than one earner" has been part of the W-4 long before the latest tax change.

In the example here, having both withhold "single with 2 allowances" would provide the same ~$600 refund as the one earner case described earlier.

MDM

  • Walrus Stache
  • *******
  • Posts: 8782
Re: CBS Article - Millions of Taxpayers Could Wind Up Owing in 2018
« Reply #8 on: September 12, 2018, 10:53:44 AM »
I ran the numbers using the IRS calculator for my DH and I; it projects that we'll be about $11k short come tax time. Guess I don't mind having an interest-free loan from the gov't and glad I won't be surprised come tax season.
It's only interest-free if you fit into one of the safe harbor rules - i.e., don't need to pay estimated tax.

Still Being

  • Pencil Stache
  • ****
  • Posts: 663
Re: CBS Article - Millions of Taxpayers Could Wind Up Owing in 2018
« Reply #9 on: September 12, 2018, 10:57:08 AM »
Millions will end up owing. Millions will end up with a refund. :D

MDM

  • Walrus Stache
  • *******
  • Posts: 8782
Re: CBS Article - Millions of Taxpayers Could Wind Up Owing in 2018
« Reply #10 on: September 12, 2018, 11:16:52 AM »
Millions will end up owing. Millions will end up with a refund. :D
Plus ça change, plus c'est la même chose.

MustacheAndaHalf

  • Handlebar Stache
  • *****
  • Posts: 1364
Re: CBS Article - Millions of Taxpayers Could Wind Up Owing in 2018
« Reply #11 on: September 13, 2018, 07:29:57 AM »
I ran the numbers using the IRS calculator for my DH and I; it projects that we'll be about $11k short come tax time. Guess I don't mind having an interest-free loan from the gov't and glad I won't be surprised come tax season.
You might be surprised by a "late payment" penalty as a result of not paying estimated taxes.  The tax software I use considers the current date in calculating the penalty.  That loan might not be as free as you expect.

katsiki

  • Handlebar Stache
  • *****
  • Posts: 1238
  • Age: 38
  • Location: La.
Re: CBS Article - Millions of Taxpayers Could Wind Up Owing in 2018
« Reply #12 on: September 13, 2018, 07:40:36 AM »
I expect this to be an issue for many.  Our HR folks have put the word out...  Hope folks listen.  I plan to be in safe harbor and just pay the difference.  I am expecting to owe about $3K.

YoungGranny

  • Pencil Stache
  • ****
  • Posts: 548
  • Age: 28
Re: CBS Article - Millions of Taxpayers Could Wind Up Owing in 2018
« Reply #13 on: September 13, 2018, 07:51:44 AM »
So it appears my husbands paycheck was not affected as severely as mine was. My withholdings literally were cut in half despite no changes on my exemptions (still 0). All in all, we should owe about $3k using more accurate numbers (I was estimating a few things but wanted to firm it up after seeing my initial results). I plan to be in safe harbor and just pay the difference. I also think going forward I'll have extra withheld from my paycheck so this is not an issue. I'm also telling coworkers to check since even a $3k surprise for a lot of people would be tough.

trollwithamustache

  • Pencil Stache
  • ****
  • Posts: 579
Re: CBS Article - Millions of Taxpayers Could Wind Up Owing in 2018
« Reply #14 on: September 18, 2018, 12:35:21 PM »
Millions will end up owing. Millions will end up with a refund. :D

And its all Obama, er, I mean Trump's fault!  sorry, old habits die hard.