Even after nearly a decade of doing taxes i am shocked and surprised by how people spend money. I get spending money. I understand that no matter what you make you want more. I am not surprised that many people are in debt and they live a lifestyle above their means. To me that means typically using a CC to supplement a lifestyle that is unaffordable. But this year more people than ever were unable to pay their IRS tax bill.
All of the families/couples earned above $100k. 2 earned above $150k closer to $200k and the other 2 families earned about $120-130k. Yes we live in an expensive area and it's hard to live. But honestly there are famillies living on less. It's that all these families have made a choice to not pay their tax bill because they deliberately are unwithholding and then shocked when it comes back to bite them.
Couple 1 added another $8k to their already owed back taxes bringing them to almost $30k on a payment plan. I did tell them after $50k the IRS would probably deny the payment plan and potentially start garnishing their wages. They didn't seem at all concerned. I wanted to shake them and say you realize that the IRS doesn't go away with bankruptcy? I did suggest putting it on a CC but they didn't have enough space to charge their debt and still live. What they drive? A lexus. This is a point where a beater would probably be better to give them extra money to pay the irs. I mean technically they are not spending their money but the governments.
Couple 2 same thing. They couldn't afford to pay their $5k tax bill. They were shocked. But half of the couple a guy earning $70k paid $3k in federal income taxes. They were stunned when i pointed out that's maybe why they owed $5k. They figured the money they took home every month was theirs. They were used to having $2-3k/week coming in because their biweekly paychecks were on opposite weeks. They have been bringing home $10k month and had no savings to pay for their tax bill. They drove a bmw. Of course both cars could have been old and cheap but I'm guessing a $5k beater is cheaper to pay off the IRS.
IRS debt doesn't go away with bankruptcy and it's hard to wait 10 years for it to be forgiven. In fact bankruptcy can extend the 10 year forgiveness for IRS debt.
The other two couples, one woman she didn't pay her irs bill from 2019 and the fees and interest had snowballed like a credit card making it next to impossible for her to pay off. I do feel bad for her but at the same time she too isnt' withholding enough when she owes every year.
The final couple well everything did them in. While they owed the irs $20k, I had to suggest talking to a bankruptcy lawyer. They owed $100k on credit cards, $50k in medical bills from a recent ankle surgery where they didn't have health insurance. Even making $120-150k I'm not sure they can get out from under all that debt.
I don't understand how people see their money coming in and set it aside or have it withheld. I mean i get one time things that happen an inheritance, gift, bonus. But knowingly not paying enough taxes so you have more money to spend every month is crazy. The money isn't yours it's the government and the IRS is not a fun thing to deal with.
April 17th, 2024 at 11:05 am 1713351933
I welcome any advice you may have on withholding calculations.
April 17th, 2024 at 02:48 pm 1713365316
April 17th, 2024 at 09:17 pm 1713388678
You need to know how you are filing - in your case, probably married, filing jointly.
You need to estimate your gross income.
Subtract from that what you are saving in an FSA, HSA, Pre tax IRA/401k, cost of employee sponsored health insurance, 529 plan.
Subtract your standard exemption (if you itemize it might be higher, but use this as a base)
Subtract child credit deductions.
That is your taxable income.
Find the tax table for your filing status.
For you, you owe 10% on the first $23,200 or $2320.
You owe 12% on the next level, up to $94,300 - so $8,532
You owe 22% on the next level, the amount over $94,301 up to
$201,150.
You owe 24% of amounts between $201,151 to $383,900. (If you earn more than that, find a tax accountant)
Add the amount of tax you owe.
Divide that by the number of pay periods in a year.
If less than that is withheld, put the difference in a savings account. You can earn interest until it’s time to pay.
If it’s more, you are loaning the government money interest free and will get a refund. You can increase the number of deductions to lower it if you want.
If your income varies month to month, make a spreadsheet so you can periodically check how you are doing.
April 18th, 2024 at 03:01 am 1713409305
April 19th, 2024 at 04:28 pm 1713544114