Yes, we owe a lot. Again. Now, we were not supposed to owe very much ($7K was what we were expecting) based on our calculations. However, M switched jobs, we had the income/bonus/repayment issue, & an error on the side of M's previous employer where they did not correctly withhold from a stock exercise when he left the company.
We owe just under $16,000 in federal taxes. Now, I've already had my crying jag over this. My personality needs to immediately process & accept the situation, then look for solutions for dealing with it. I do not handle drawn out stress well, & must have a solution in mind before I move on, mentally.
That said, it's money we owe, & we clearly (CLEARLY) need a more proactive tax strategy for 2013. Here's what I've done (again, aside from the crying):
- Increased my with holdings by $200/month, to make next year less painful
- Increased M's with holdings by $200/month, for next year
- Figured out where the money is coming from (the vast majority will come from an investment that we will sell. The rest will come from our liquid savings account. We don't want to completely empty this, in case of an emergency).
We are two very smart people, so . . . how do we keep screwing this up on such a giant scale? Well, I know that the only accountant we used was not able to predict how much we'd owe, the IRS calculator is grossly inaccurate, & we've had a variety of "changes in circumstance" this year that made any calculation difficult.
My goal for 2013? To owe less than $5,000. If we can get within that window, well, that's about as good as I can hope for.
How am I going to accommodate the $400/month in "lost" cash flow? I'm working on that. Given our tight budget, that should be a very fun exercise. ;-)
I almost blew it on the frugality side. The stress & "oh, what does it matter if I keep my weekly spend under $300, when I owe $16000) side of my almost took over yesterday. The kids wanted to go out to dinner (I almost caved), I was running late for lunch, & almost went out. . . the list goes on. I managed to keep my head together & we're still on track for our weekly spending goal. Baby steps, people!
Have you done your taxes yet? We've uploaded 95% of our information into TurboTax, & I don't expect the remaining 5% to have a material impact on how much we owe, luckily.
Ouch, $16,000 is definitely a lot. Luckily I will be getting money back. I can't imagine owing so much, I don't know what I'd do!
ReplyDeleteWell, we definitely expected to owe some - I was prepared for $10K, but hoping for more like $7K. Clearly, I was mistaken. We acutally got audited once, & the IRS said we owed $52K. It was a paperwork error on their end, but I had a three week old baby & the hormones drove me to a stress level I can't describe. I called my mom. It's always bad when you call your mom crying. ;-)
DeleteDo you declare any deductions with your employers? Could you take them to 0?
ReplyDeleteYou must have so much variable commission/bonus pay beyond your salaried wages to cause a tax bill that high.
Is there anyway to go back a few years and see a trend/trajectory on the bonus/comm. pay as a percentage of wages....to use as a guide to guesstimate where your 2013 non-wage compensation might fall, so you can get the withholding a little closer to what it actually ends up to be?
I don't know.....looking at all the variables you had in 2012, I don't think there was anything you could have done differently to make this monster bill not happen.
Maybe next year, just set up an ING acct. or something and slide a bunch of savings into it in anticipation of having another monster bill in 2013 along with increasing the withholding.
Geez....I'd probably stroke out if I had that large of a tax bill....
We both claim zero. Now we're addiitonally having extra money taken out. I think the issue is all of the variable income. Our salaries are correctly calculated (actually, if it were just our salaries, we'd get a refund.) The other issue is that the taxes for our income level have varied a bit (credits phasing out, which means that purely calculating year over year) has helped us semi-predict, but not get very close.
DeleteAgreed, 20122 was a totally volatile year. Let's hope that 2013 is more stable. :-)
We had the money saved, but just spent a boat load on the refinances (we should get a chunk back), had the "payback" issue, & don't want to drain the emergency fund. Which, is a very good thing, considering that we just got a call about our vacation house having a leak.
Murphy, is that you?!!!!
Not to be funny, but when it rains, it pours! Ok, maybe that's a little funny in a groaning sort of way. lol
DeleteHubs gets a bonus but the company takes out the taxes before it hits our account, which always bums me out, but now I am thinking I am glad they do it that way. ;-)
Exactly, the company M used to work for (&, my employer) does as well. They deduct it automatically. Which is why we assumed that everything was okay. However, because it was his last paycheck, the withholdings were not the standard bonus deductions. I don't really understand why, & honestly, M himself should have caught it, but the paycheck was anything but standard - payout of vacation hours, payout of money left on his meal card, last salary, etc. You can see how he wouldn't have noticed. Or, that's what he keeps telling me. ;-)
DeleteI have always claimed 0 plus 20.00 and so does dh now. As I mentioned before my mom was an irs agent and we learned not to mess around with that.
ReplyDeleteRemember you can also set up an installment agreement. Yes you will pay interest and penalty on it but if you gather as much as you can before the 15th and then apply for the installment agreement maybe it would work for you. But do what works for you.
We have most of our stuff together since I had to do the FASFA and we will most probably get a small refund which was what I was aiming for. Just remember there was nothing you could have done to control this
We'd rather pay up front, because through the year, we're going to need to be saving for 2013 taxes. ;-)
DeleteWhat a pain!!
This is on top of the $16k you had to "refund" a few months ago? Geez Louise!! I have no advice other than what has already been suggested (having more taken out, having a separate savings acct for it).
ReplyDeleteTomorrow is my tax day. We are still missing one W-2, but I am going to put in numbers based on the final paycheck of the year as a place holder. It will at least be in the ballpark.
Yep, on top of the other money, which was technically a advance payment that was classified as a bonus (but, needed to be earned).
DeleteAdjusted the withholdings, & beefed up our savings plan for next year. Barring any job changes, major other variables, we should be okay for next year. I'm sure the tax rate will change between now & then, catching us by surprise again! ;-)
Oh my! :( That's terribly scary. I'm mostly done with taxes and I owe about $1300 as of this last estimation. That's a lot more than I was expecting (I know it doesn't sound like a lot, but with my income, it hurts!), so I'm changing my W4s again in April to add 0 withholding, and maybe even some extra... I don't want a refund at the end of the year, but I definitely do NOT want to owe either.
ReplyDeleteAnything more than you were expecting to owe feels like a lot! Sounds like changing your w4 is the right step for next year!
DeleteWe owe money too. Between my husband's vacation payout and two bonuses, we now owe. Not quite as much as 16,000, but enough to make us hurt. I don't have the exact figure because I'm still waiting on some stuff. Next year should be better as there will be no bonuses nor extra money to add in as income. (Now, doesn't that sound wrong?)
ReplyDeleteAnyway, at least you are good income earners. You are smart to change your deductions.
That does sound wrong, but we're in the same boat. M's was a one time payout when he left, & the taxes were not correctly withheld.
DeleteYou're right - we make a very healthy combined salary. What matters is that we're prepared & plan for things like this, and that we get ahead of it for next year!
oh I hate owing the tax man! can you pay it off or do they charge interest if you do that?
ReplyDeleteSadly, they would charge interest (on top of the penalty we have to pay for owing so much.) Talk about kicking us while we're down! :-(
DeleteOh my!! :( We'd be starving for the year! Literally! No advice really on top of what's been said... i'm praying for a refund big enough to bulk up our EF by $1K! That would be a blessing! Hope you're able to figure everything out... I don't even know what we'd do. Sorry!! :(
ReplyDeleteI will be crossing my fingers that you get a great refund! We should theoretically be getting a little over $5,000 back as part of the December repayment/readjustment/restatement of earnings debacle. That will hopefully replenish the old efund that is taking a serious beating!
DeleteIt’s really hard when you switch jobs and find that certain things weren’t managed well. And taxes, of all things, seem to be the easiest to be mishandled. Hope it wouldn’t happen again! Gilbert@ATBS
ReplyDelete