Will I owe or get a refund for 2016?

[SyZ]

Last year, I made 55k and invested 10% into my 401(k), and ended up owing $150 in CA state tax and $800 in federal tax.

This year, I make 57k and invest the full 18k into my 401(k). I've made no changes to my exemptions.

Will I owe or get a refund? Why?

[Nothlit]

Have you tried plugging your numbers into the IRS Withholding Calculator to see what it says?

[SyZ]

I think I screwed up the numbers ... I'll have to verify when I'm at work and can see my pay stubs.

Your Results
Based on the information you previously entered, your anticipated income tax for 2016 is $3,988. If you do not change your current withholding arrangement, you will have $7,750 withheld for 2016 resulting in an overpayment of $3,762 when you file your return.

So I would get a refund of $3,762, or owe it? Either one is bad. The latter is REALLY bad.

Your Results
Based on the information you previously entered, your anticipated income tax for 2016 is $3,988. If you do not change your current withholding arrangement, you will have $7,750 withheld for 2016 resulting in an overpayment of $3,762 when you file your return. If you want your withholding to more closely match your anticipated tax, adjust your withholding on a new Form W-4 as follows:

    For the only job you entered (which has a projected salary of $58,000): 10 allowances.
    Check the “Single” box on your Form W-4

Assuming this recommendation is in effect for the rest of 2016 your expected refund should be about $2,500. Following this recommendation will ensure that the amount withheld from your wages will cover all of your projected tax liability while minimizing your refund.

Caution! The recommended number of allowances will result in no income tax being withheld from your pay (because your year-to-date withholding is already sufficient to meet your anticipated tax). Therefore, you should analyze your withholding again at the beginning of 2017 (or any time there is a change to your tax situation). If you do not check your withholding at the beginning of next year, you will likely be underwithheld for 2017.
Following is a recap of information entered on the preceding pages on which the above advice is based.
Prepared: October 13, 2016
Filing Status: single   Someone else can claim you as a dependent: no
Number of jobs: 1   Number of dependents: 0
Will you be 65 or older 1/1/2017: no    Are you blind: no
Child & dependent care credit qualifying persons: 0    Child & dependent care credit expenses: $0
Eligible children for child tax credit: 0    Other credits: $0
Total salary: $58,000    Total plans and cafeteria: $18,000
Total tax withheld to date: $6,500    Total tax withheld from last check: $250
Total earned income other than salary: $0    Nonwage income: $0
Adjustments to income: $0    Total itemized deductions: $0
Projected additional withholding if you do nothing: $1,250    

[MDM]

Based on the information you previously entered, your anticipated income tax for 2016 is $3,988.

This is what the program expects you will owe for the 2016 tax year.

If you do not change your current withholding arrangement, you will have $7,750 withheld for 2016

This is what the program expects you will have already paid by withholding.

resulting in an overpayment of $3,762 when you file your return.

Because (assuming the above is true) you will have paid more than you owe, you will get a refund.

Of course, with any computer program, GIGO applies so do check....

See one or more of the following if you'd like to get more comfortable answering this for yourself:
http://forum.mrmoneymustache.com/taxes/best-way-to-calculate-w-4-exemptions-for-2016/
http://forum.mrmoneymustache.com/taxes/would-you-rather-owe-or-get-a-refund/
http://forum.mrmoneymustache.com/taxes/am-i-witholding-too-much/
http://forum.mrmoneymustache.com/taxes/best-paycheckwithholding-calculator(s)/
http://forum.mrmoneymustache.com/ask-a-mustachian/turbo-tax-vs-cpa/

[badbear]

Pretax-401k deferrals should reduce the taxes withheld from each paycheck. If you had selected an appropriate withholding, you should be having less withheld than last year, as your taxable income is about $10,500 less than last year. But you should owe significantly less tax overall. If your numbers were correct, the number you got is a refund (you overpaid, therefor you get that money back). I rather doubt you would overpay that much if you had an appropriate withholding. Why was your withholding so high? Definitely use your actual pay stubs and double check with the calculator.

[Enigma]

My employer automatically reduced my tax payments when my 401k increased.  I would say you would be about the same as last year if your taxes were reduced by checking your statements.

[SyZ]

Here's my latest statement (I can't get it any cleaner in here):

EARNINGS SUMMARY CURRENT YTD |
|--------------------------------------------------------------------|
| Earnings: 2,216.60 46,237.33 |
| Less |
| Taxes: 275.17 6,766.16 |
| Deductions: 763.41 12,998.47 |
| Add |
| NCA Taxes Pd: 0.00 0.00 |
| ----------- ------------ |
| Total: 1,178.02 26,472.70

This is for tomorrow - so that would put 5 paychecks left as I get paid bi-weekly. That means another $275 * 5 = $1,375, on top of the $6,766.16 I've paid would be $8,141. Which means I've paid even more than the $7,750. I also checked and I have 5 exemptions.

That's absurd. I'm going to get $4k back as a refund, whereas last year I owed $1,000? And all I did was change from a 15% contribution to 33%? That doesn't sound remotely correct. $4k over 26 paychecks is $154 each one, meaning I've been paying more in overtaxes than the minimum payments on all my student loans and car combined.

I guess I need to file the second I get my W-2 next year and immediately apply the refund towards my debt, and figure out why I'm overpaying so much.

Edit: $58 ($1k in overtime) - $18k is $40k. Take away the $6.3k standard deduction, that's $33.7k. That puts me in the 15% bracket, so I should be paying $5,055. That puts it at about a $3k refund. Still doesn't make sense.

[badbear]

I assume the total taxes on your pay stub includes FICA taxes (Social Security/Medicare), since it is not split out. Those don't count toward your federal income taxes. FICA taxes should be 7.65% of earnings before any deductions. That would put your federal income tax paid so far at $6766.16 - ($46237.33 * 0.0765) = $3229.

If you look at your actual pay stub and not just the totals so far for the year it should split out Social Security and Medicare taxes from your federal tax payments... unless you are somehow exempt from FICA taxes? If not it seems to explain the discrepancy.

[SyZ]

TAXES CURRENT YTD |
|--------------------------------------------------------------------|
| Federal |
| Federal Single 05 Exemptions |
| TX Withholding Tax 70.61 2,151.77 |
| TX EE Social Security Tax 134.19 2,799.06 |
| TX EE Medicare Tax 31.38 654.62 |
| State |
| California Single 05 Exemptions Work |
| TX Withholding Tax 19.42 752.58 |
| TX EE Voluntary Disabilit 19.57 408.13

[badbear]

| TX Withholding Tax 70.61 2,151.77 |

This is the income tax paid so far that you should plug into the IRS withholding calculator. I don't know why you were claiming so many exemptions, but you look to be on track to underpay your taxes for the year unless you get rid of the exemptions and possibly add some extra on each paycheck. The calculator should tell you what to do.

[MDM]

I also checked and I have 5 exemptions.

Is that you plus spouse plus 3 dependents for a total of 5 exemptions on line 6 of Form 1040?  Or did you enter 5 allowances on Form W-4?

Edit: $58 ($1k in overtime) - $18k is $40k. Take away the $6.3k standard deduction, that's $33.7k. That puts me in the 15% bracket, so I should be paying $5,055. That puts it at about a $3k refund. Still doesn't make sense.

You are missing the exemption deduction (# of exemptions * $4,050) and the 15% doesn't apply to the entire amount.

You might take your 2015 Form 1040 and redo the calculations using your 2016 estimates....

[MDM]

Federal Single

Assuming that filing status is correct, $40K will be your W-2 Box 1 number, no other income, standard deduction, and nothing else out of the ordinary, your 2016 IRS tax will be ~$3,984.

[SyZ]

So I'm back to not only not getting a huge refund but also needing to pay even more in taxes? Cool.

[DrF]

The Federal government just gave you a 0% loan. But next year you should try to get closer to $0, I'm not sure the cutoff where they force you to make quarterly payments is when you underpay throughout the year.

[SyZ]

Yea, I should have known something was up when I saw I was taking home a massive 53 cents per dollar, that's way too high. Can we get it under 50 cents?

Oh, right, sales tax - we sure can

[teen persuasion]

Yea, I should have known something was up when I saw I was taking home a massive 53 cents per dollar, that's way too high. Can we get it under 50 cents?

Oh, right, sales tax - we sure can

But don't forget, you said you were deferring 33% to your 401k.

You should see my DH's take home - after health insurance, HSA, and 401k, it's a whopping $270 biweekly.  And he still won't max the 401k out this year!



Why did you choose 5 exemptions if you are single?  Sounds like it is time to file the w4 again to change it to zero for the rest of the year, and possibly add an extra $ amount as another poster mentioned.  Check your 401k contributions, too - if your paychecks are fairly consistent I couldn't get the total to $18k from what you posted. Maybe you only bumped contributions to 33% partway thru the year.
763.41 * 5 = 3817.05
12998.47 + 3817.05 = 16815.52

[SyZ]

Yea, I should have known something was up when I saw I was taking home a massive 53 cents per dollar, that's way too high. Can we get it under 50 cents?

Oh, right, sales tax - we sure can

But don't forget, you said you were deferring 33% to your 401k.

You should see my DH's take home - after health insurance, HSA, and 401k, it's a whopping $270 biweekly.  And he still won't max the 401k out this year!



Why did you choose 5 exemptions if you are single?  Sounds like it is time to file the w4 again to change it to zero for the rest of the year, and possibly add an extra $ amount as another poster mentioned.  Check your 401k contributions, too - if your paychecks are fairly consistent I couldn't get the total to $18k from what you posted. Maybe you only bumped contributions to 33% partway thru the year.
763.41 * 5 = 3817.05
12998.47 + 3817.05 = 16815.52

Because I'm 32 and have no clue what an exemption was. I vaguely remember at one point being told to put it at 5 so I could get some more take-home each paycheck.

I upped it to 33% around March, before that I was at 15%. I'm actually not sure if I'll put in the full 18k or end up somewhere around 17k, this is partially due to the timing in March but also because whenever I make a change it takes a few weeks to update.

I owed the last two years so I wasn't expecting a $4k return, so am not going to cry that I'm not getting it. But if I end up owing again despite lowering my income $18k and having nothing else change, that would suck.

[MDM]

...put it at 5 so I could get some more take-home each paycheck.
...if I end up owing again...

...it will be because that extra take-home was the tax you should have been paying all along.  Does that make sense?

[SyZ]

Makes total sense. I'm salaried at $19,200 more than the job I got right out of college 4.5 years ago and take home less than then because all my eggs are in one retirement basket I won't get since I'll die of some undiagnosed heart condition at 53 I wasn't aware of because I now pay four times as much for health insurance I can't use due to a skyrocketing deductible

[ender]

You can contribute to a traditional IRA and reduce the amount you owe in taxes pretty meaningfully, too.

[Cpa Cat]

Pull up a W-4 and just read the top section that says "Personal Allowance Worksheet." It walks you through how to fill out.

You'll probably end up with a 1 on line A and 0's on B-H. For a total of 1 exemption. But read it! Don't take my word for it.

Remember to fill out a W-4 for California while you're at it.