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Need help with tax deductions from paycheck

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Money Talk > Taxes

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nyyankee
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Need help with tax deductions from paycheck  Reply with quote  

I get around $13,000 tax return every year. Thats with maxing out my 457 with $15,000 and claiming married 5,single 0 on my paycheck. I just lowered my 457 to around $5000 for the year and would like to claim married 10 (the max) single 0 on my paycheck. My salary is pretty much the same every year. Do you think I will still get a return? I just want more money up front and not pay anything at the end of the year.
Post Sun Jun 01, 2008 9:14 pm
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efflandt
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If you are getting a $13,000 tax refund, you need to "properly" fill out a W-4 form (available from irs.gov) based on your taxable income and deductions (not just guess). There is a worksheet on the back to figure it out. See IRS Publication 919.

But since you call it a tax "return", I am not sure if you are discussing refund, or tax liability.

Contributions to a 457 plan are tax deferred (not charged federal income tax on your paycheck), therefore, you do not need any withholding adjustments if you change your contributions. You only need to change it to what is acceptable for smaller refund or small amount due based on dependents and deductions.

If you end up owing more than $1000 at April tax filing time, there may be an underwithholding penalty (with a few exceptions). So don't just arbitrarily max out W-4 allowances or it may come back to bite you. Follow instructions.
Post Tue Jun 03, 2008 6:41 am
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nyyankee
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The $13000 is my return. Federal/State. I did fill out the W-4 and it said 10 dependants on my check. I just thought that lowering my 457 contributions from max of 15000 to 8000 would have an impact on my bottom line. I also went to the irs site and filled out there withholdings calculator. Im going to go with the Federal married 10, Single state 0 on my paycheck. I should still be alright.
Post Tue Jun 03, 2008 4:44 pm
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coaster
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Return = the forms you fill out to declare your income and taxes. Refund = the money you get back if you overpaid in withholding during the year. And how can you claim married on Federal and single on state? Bottom line means net of taxes so reducing your contributions will put more money in your pocket now, but actually has an adverse effect on your bottom line because your taxes will be higher. The contributions are just your money that you're shifting from your "spend now" pocket to your "spend in retirement" pocket.

~Tim~
Post Tue Jun 03, 2008 6:47 pm
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nyyankee
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The 13k was my refund. Right now on my paycheck I claim federal married 5 and state single 0. Its just on my paycheck. In a perfect world I would like around 4-6k back and more money in my pocket during the year.
Post Tue Jun 03, 2008 7:18 pm
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BlankenshipFP
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nyyankee,

Why do you want to loan $4k to $6k over the course of the year, interest free, to the government? I have never understood this particular mentality, although there are plenty of folks to practice it.

If it's a question of wanting to have a pile of cash all at once, why not have a payroll deduction set up to put the money into a savings account, and then on April 15 each year, empty the account and buy bubble gum with it (or whatever you do with your refund)? This way, if your need for the funds comes up earlier in the year you can get at the funds, and you'll at least be earning some interest on it (even though that rate is pretty dismal right now, it's at least YOURS, not the government's).

... and if you don't like the idea of having no refund at all, change your W4 to cut your withholding in half and put the difference into a savings account for the first year, just to see how it works. Just a suggestion.

Jim Blankenship, CFP, EA
Blankenship Financial Planning, Ltd.
www.BlankenshipFinancial.com
Standard IRS Circular 230 Notice Applies
Post Wed Jun 04, 2008 1:41 pm
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nyyankee
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I agree with you. But I know that if the money is there I will spend it. So I just get a return. But now Im changing my mind. SO my w4 was at 5 dependents now I put it to 10 so I will get more on my check.








quote:
Originally posted by BlankenshipFP
nyyankee,

Why do you want to loan $4k to $6k over the course of the year, interest free, to the government? I have never understood this particular mentality, although there are plenty of folks to practice it.

If it's a question of wanting to have a pile of cash all at once, why not have a payroll deduction set up to put the money into a savings account, and then on April 15 each year, empty the account and buy bubble gum with it (or whatever you do with your refund)? This way, if your need for the funds comes up earlier in the year you can get at the funds, and you'll at least be earning some interest on it (even though that rate is pretty dismal right now, it's at least YOURS, not the government's).

... and if you don't like the idea of having no refund at all, change your W4 to cut your withholding in half and put the difference into a savings account for the first year, just to see how it works. Just a suggestion.
Post Wed Jun 04, 2008 4:41 pm
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BlankenshipFP
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You could always just send it to me and I'll use your money interest free for a year! Razz I think you'll be well-served by getting into the savings habit, plus teaching yourself discipline to *not* raid those funds.

A little off the original topic: There must be some unusual circumstances with your tax return, if you really don't have five or ten dependents and you're still getting that much of a refund... do you have an excessive amount of deductions, or perhaps sporadic income throughout the year?

Jim Blankenship, CFP, EA
Blankenship Financial Planning, Ltd.
www.BlankenshipFinancial.com
Standard IRS Circular 230 Notice Applies
Post Wed Jun 04, 2008 5:45 pm
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nyyankee
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My deductions were around 35000 off my gross of 97000. I am a firefighter so I can also right off,meals, mag subscriptions,cell phone,turnout gear etc. Anyway I maxed out my 457 w/ 15000 also. Now this year I will be only putting in 8000 and im going from 5 to 10 on my check. Like I said before when I fill out the w4, like filing jointly with me being the only income, 2 kids, making under $86000 for the year etc. I came up with 9 or 10.







quote:
Originally posted by BlankenshipFP
You could always just send it to me and I'll use your money interest free for a year! Razz I think you'll be well-served by getting into the savings habit, plus teaching yourself discipline to *not* raid those funds.

A little off the original topic: There must be some unusual circumstances with your tax return, if you really don't have five or ten dependents and you're still getting that much of a refund... do you have an excessive amount of deductions, or perhaps sporadic income throughout the year?
Post Wed Jun 04, 2008 5:52 pm
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BlankenshipFP
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That's a relatively high amount of deductions by percentage of income - this is why it's turning out with the refund that you receive... hope this new withholding plan works out for you!

Jim Blankenship, CFP, EA
Blankenship Financial Planning, Ltd.
www.BlankenshipFinancial.com
Standard IRS Circular 230 Notice Applies
Post Wed Jun 04, 2008 7:05 pm
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nyyankee
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Maybe Im confused. If I go from 5 to 10 they take less out on taxes and I get more net pay correct?






quote:
Originally posted by BlankenshipFP
That's a relatively high amount of deductions by percentage of income - this is why it's turning out with the refund that you receive... hope this new withholding plan works out for you!
Post Wed Jun 04, 2008 7:15 pm
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BlankenshipFP
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That is correct. Those are called "withholding allowances", and the more you have, the more take-home pay you get.

When I said
quote:
That's a relatively high amount of deductions by percentage of income


I was referring to your post
quote:
My deductions were around 35000 off my gross of 97000.


Meaning: Deductions in excess of 35% of gross income is a high ratio, in my experience...

Jim Blankenship, CFP, EA
Blankenship Financial Planning, Ltd.
www.BlankenshipFinancial.com
Standard IRS Circular 230 Notice Applies
Post Wed Jun 04, 2008 7:39 pm
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nyyankee
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Im just trying to find the right number. Hopefully, the 10 withholding allowances and not maxing out on my 457 with only 8k off my total of around 90k this year will still land me a small return and more in pocket $$$







quote:
Originally posted by BlankenshipFP
That is correct. Those are called "withholding allowances", and the more you have, the more take-home pay you get.

When I said
quote:
That's a relatively high amount of deductions by percentage of income


I was referring to your post
quote:
My deductions were around 35000 off my gross of 97000.


Meaning: Deductions in excess of 35% of gross income is a high ratio, in my experience...
Post Wed Jun 04, 2008 10:14 pm
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Scrutnizer
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I'm starting a new job and don't have anything to deduct. I'm on my spouse's insurance...the company doesn't offer 401 so there's nothing left for me to deduct. Is there anything I can do to deduct from my salary since I don't want all my income to be taxed? Please help!
Post Tue Jan 05, 2010 8:55 am
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BlankenshipFP
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If you're not covered by a retirement plan, you can contribute up to $5,000 to a traditional IRA and deduct that from your income for tax purposes. If you're over age 50, you can increase this amount by an additional $1,000. You have until 4/15/2010 to make this contribution effective for tax year 2009.

Hope this helps...

Jim Blankenship, CFP, EA
Blankenship Financial Planning, Ltd.
www.BlankenshipFinancial.com
Standard IRS Circular 230 Notice Applies
Post Tue Jan 05, 2010 12:13 pm
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