I just got a promotion at work with a significant pay increase. How do I make sure I don't get stuck with a huge debt to the IRS at the end of the year?
I'm married, I don't claim my kids on my W-4, I don't have many deductions, except my home interest payment and my student loan interest payment, and maybe now I can deduct expenses like cell phone and uniforms (I'm a nurse). I am putting 8% in a 401K that is pre-tax, but I might be able to add more now (it's not matched).
Any suggestions?
2006-08-12 03:50:15 · 11 answers · asked by PMS 24-7 3 in Business & Finance ➔ Taxes ➔ United States
I didn't think I was bragging. Simply trying to get advice without paying an accountant. Sorry if I offended you, mister.
2006-08-12 03:55:44 · update #1
Congratulations on your increase! I'd suggest changing the number of exemptions on your W4. If you're alread claiming yourself, spouse and children, reduce the number to just yourself, or even 0. You will have more money withheld for taxes, but since you received an increase, it will still be an increase in you take home pay. If you itemize your deductions (home mortgage interest, property tax, state income tax, charitable contributions, etc..) then it may be beneficial to deduct your Unreimbursed Employee Business Expenses. You may look into filing form 2106, but you may be able to simply take your uniforms, laundry, shoes, dues, licenses, etc... on Schedule A as miscellaneous itemized deductions.
Good luck!
2006-08-12 04:15:40 · answer #1 · answered by Adios 5 · 1⤊ 0⤋
If you're allowed to do so, adding more to your 401K is a good idea.
Your withholding should go up with the new salary, and if you aren't claiming your kids on your W-4, you shouldn't be in trouble at tax time if you can then claim them as dependents. That assumes your husband isn't claiming him on his - if he is, you might want to do some calculations - if you've been very close to even the last couple years, might want to drop his down by 1.
If you itemize, which I assume you do since you mention home interest deduction, you could and should have been claiming your uniforms all along. You can claim the cost of purchase and upkeep. Unfortunately it only applies to the amount that exceeds 2% of your income (total for you and your husband if you file joint) so you might not get it.
Congratulations on your promotion.
2006-08-12 03:57:00 · answer #2 · answered by Judy 7 · 1⤊ 0⤋
First, how much of a pay raise are you talking about? 3%? 5%? 10%? more?
If you are concerned about the tax implications of the raise, then put the money from the raise into your 401K.
Another option is to create an IRA, and put some money into that.
If you don't want to invest all of it, then what you need to do is see how much your witholding went up as a result of the raise.
If you're in the middle class bracket ($61,300 - $123,700), then your taxes will increase by 25% of the amount of the raise.
Ex:
Your salary is raised by $5,200/yr,
you get paid every two weeks (26 checks a year).
That's an increase of $200/check before taxes
Your federal income tax should increase by 25% of the raise, or $50/check.
Medicare is 2.9% ($5.80/check)
SS is 6.4% up to $86,400, then 0% after that ($12.80/check)
State income tax is ???
2006-08-14 02:36:30 · answer #3 · answered by Anonymous · 0⤊ 0⤋
You won't owe if your w-4 is M0 (married zero dependents). That means the IRS is withholding more money from each pay than you'll owe once you complete your taxes. The pay raise won't affect that, because the withholding amounts are based on salary. As your pay increases so will the amounts withheld from each pay.
2006-08-12 04:12:52 · answer #4 · answered by ? 2 · 0⤊ 0⤋
Sounds like you should be ok as you are. Only thing you can do is alter your exemptions on the W4 but you already have done that.
Congrats and keep sticking all you can in the 401K!
2006-08-12 03:57:11 · answer #5 · answered by Anonymous · 1⤊ 0⤋
This is another example why the Fair tax Initiative is so important. Our lives, our economy, and our government would be simpler and more effective by eliminating state and federal income tax and moving to a consumption only form of taxation.
Interested?
Read more:
http://www.fairtax.org/
2006-08-13 05:50:38 · answer #6 · answered by blewz4u 5 · 0⤊ 1⤋
earnings tax; a greater flatter,yet a technique or the different greater cutting-side one. because of the fact it somewhat is poorer volk like me whom ought to apply the main of in spite of money I make from artwork basically to purchase the necessaries of life anyhow. additionally because of the fact sales taxes tend to get rid of greater proportion of earnings from the poorer contributors of our society than the super-wealthy idlers whom basically stay off their investments made by utilising their ancestors 5 generations in the past. no longer each and every physique is sensible sufficient to circulate to varsity U be conscious of!
2016-09-29 04:46:24 · answer #7 · answered by ? 4 · 0⤊ 0⤋
go to Hrblock.com, they have calculators that can figure out what you will owe or get back at the end of the year. that way you can change your w4 at work to solve any problems
2006-08-12 11:16:18 · answer #8 · answered by goofybored 2 · 0⤊ 0⤋
I'd suggest finding another way to brag.
2006-08-12 03:52:22 · answer #9 · answered by Anonymous · 0⤊ 1⤋
Why does this offend people?
2006-08-13 21:02:57 · answer #10 · answered by sueblue47 1 · 0⤊ 0⤋