My DH and I got married last year. Because I graduated in mid 2013, I'm very confident that my full year salary in 2014 is much higher than 2013 so we did not change the tax withhold (still withhold at single rate), with the hope that we will hit the safe harbor. Now the tax time comes, and we were shocked by the amount of tax we owe to IRS: almost $40k !!! Marriage tax penalty sucks...
So I have three questions here:
1. This $40k is calculated by turbotax. I guess this is not a common number that we should owe to IRS. Should we hire an account to do the tax again? Maybe we can reduce the tax bill a little, or maybe there are some other troubles with this large tax bill...
2. I guess I deserve some face punch here....so my husband and I just bought a house last month, with only $30k liquid emergency fund. I did not do a very good calculation on the tax bill at that time that I only expect something like $10k. Also, we do not spend much. Therefore, we are very aggressive putting all our money in retirement account and investment. In other words, we may not have enough money to cover this tax bill by April 15. Is there a way to ask for extension? Or should we use HELOC to pay the bill (4% interest)?
3. I think I should learn a lesson here, to do tax planning beforehand. However, if we do need to pay $40k more in tax, which means $3k more every month, or something more than $1500 every paycheck...My current paycheck with all deduction (401k, health insurance, tax) is only $1900..Does that mean my salary will go down to $400 every paycheck? This does not make much sense to me. Well, this year we have a house with mortgage and property tax, so maybe the tax bill should be better. But, we no longer have safe harbor, so how should I estimate how much more tax I should withhold?