Author Topic: What to Claim on Taxes  (Read 4634 times)

wkumtrider

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What to Claim on Taxes
« on: May 27, 2015, 11:53:36 AM »
Hello,

I am married, no kids,  and my wife and I both work.  The only debt we have is our house ($124,000).  We both max out a Roth IRA (one each), contribute to a 401K, and have a savings account and a few Vanguard accounts.  For 2014 we paid ~ $3000 in taxes.  I am not sure what we should claim on our taxes to pay the smallest amount possible.   Would it be best for both of us to claim 0 on our taxes, or for one of us to claim 0, and another claim 1? I want to pay as little as possible at the end of the tax season.

Thanks for any and all help!  I love this site!

Drifterrider

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Re: What to Claim on Taxes
« Reply #1 on: May 27, 2015, 12:04:03 PM »
Details.

You paid $3,000 throughout the year (via withholdings)?  You paid $3,000 (because you underpaid)?
You got a huge refund?

Details.

Tjat

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Re: What to Claim on Taxes
« Reply #2 on: May 27, 2015, 12:17:00 PM »
I'm assuming that the poster meant that when completing his taxes, he found he owed money by April 15th.

1) If you have the cash to pay it, congrats. This was a successful interest free loan from the government

2) I'm guessing this wasn't the ideal scenario. If you want to owe zero, you can lower your withholding and/or explore tax-avoidance strategies like increased pre-tax retirement deductions or loss harvesting your after-tax investment accounts.

However, to truly answer your question, we would need to know why you owed so much. In general, if your W-4 withholding is reasonably close and you don't have odd tax situations come up, this shouldn't happen.

forummm

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Re: What to Claim on Taxes
« Reply #3 on: May 27, 2015, 12:23:12 PM »
If you want to get a refund at the end of the year, you can also add in an additional fixed amount to your withholding. In your case, you had a $3000 check to write at the end of the year. So if you had an additional $3k withheld (and had a similar income/deductions situation) this year, you would have about $0 due. If you get paid monthly you could leave the exemptions alone and add another $500 in withholding to each month's pay starting with the July check.

Due to dividend income and other factors I do this too.

MDM

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Re: What to Claim on Taxes
« Reply #4 on: May 27, 2015, 12:53:12 PM »
For 2014 we paid ~ $3000 in taxes.
As others have noted this is somewhat ambiguous.

You might fill out a case study (or at least the part from gross income down through taxes paid) for clarity.

wkumtrider

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Re: What to Claim on Taxes
« Reply #5 on: May 27, 2015, 01:13:53 PM »
Sorry about the confusion.  I had to pay $3000 in Fed taxes when I filed this year for 2014.  Currently my 401k and health insurance are the only pre-tax deductions from my paycheck.  I was just curious if anyone else was in the same situation as myself and what else (if anything) could be done to help limit the amount I owe at the end of the year.  Thanks for the help.

MDM

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Re: What to Claim on Taxes
« Reply #6 on: May 27, 2015, 01:22:24 PM »
Sorry about the confusion.  I had to pay $3000 in Fed taxes when I filed this year for 2014.  Currently my 401k and health insurance are the only pre-tax deductions from my paycheck.  I was just curious if anyone else was in the same situation as myself and what else (if anything) could be done to help limit the amount I owe at the end of the year.  Thanks for the help.
Speaking of ambiguity:
  Does "contribute" to a 401k mean "we each contribute the maximum allowed to a 401k" or something different? 
  Does "health insurance" mean a HDHP so you can (and do) also contribute to an HSA?

The devil really is in the details.... ;)

dandarc

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Re: What to Claim on Taxes
« Reply #7 on: May 27, 2015, 01:23:18 PM »
You could just both claim single with 0 exemptions on your W-4's.  Unless your incomes put you into 'marriage penalty' territory, that should get you a refund, possibly a large one.

Or you could use a paycheck calculator to try different things and see how it works out.  I personally like http://www.paycheckcity.com/

Eric

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Re: What to Claim on Taxes
« Reply #8 on: May 27, 2015, 01:27:08 PM »
Sorry about the confusion.  I had to pay $3000 in Fed taxes when I filed this year for 2014.  Currently my 401k and health insurance are the only pre-tax deductions from my paycheck.  I was just curious if anyone else was in the same situation as myself and what else (if anything) could be done to help limit the amount I owe at the end of the year.  Thanks for the help.

I continually underpay my taxes based on the withholding tables.  Therefore, I just adjust them by the actual number.  In your case, $3000 is $125 per paycheck if you get paid twice a month or $115 if you get paid every other week.  The "number" claimed on a W-4 is pretty worthless.  Just adjust by the actual underpayment amount.

Drifterrider

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Re: What to Claim on Taxes
« Reply #9 on: May 27, 2015, 01:34:50 PM »
Sorry about the confusion.  I had to pay $3000 in Fed taxes when I filed this year for 2014.  Currently my 401k and health insurance are the only pre-tax deductions from my paycheck.  I was just curious if anyone else was in the same situation as myself and what else (if anything) could be done to help limit the amount I owe at the end of the year.  Thanks for the help.

So, you underpaid during the year.  Change your withholding on your W-4.  You can do it at anytime during the year.  It doesn't have to match (fed/state).  I claim 4 for federal and 2 for state to break even each year (assuming you are a US resident and have state income taxes).

Mirwen

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Re: What to Claim on Taxes
« Reply #10 on: May 27, 2015, 09:14:16 PM »
The general rule for two working adults is that the higher income earner claims the actual number of household exemptions.  In this case that's two.  The second earner should claim 0.

This should get you close, but if you want an exact answer, we need exact numbers to work with.

wkumtrider

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Re: What to Claim on Taxes
« Reply #11 on: May 28, 2015, 09:45:29 AM »
Thanks everyone for the replies.  Neither my wife nor myself max out our individual 401k, and I know increasing our contribution will reduce our taxable income.  We do have plans to increase it.  I got some great advice here that I plan to try.  Thanks again for helping me out.