How screwed am I when I do my taxes? Any advice?

Question

I live in Illinois and work in Missouri, and my employer didn't withhold ANY state taxes throughout 2007 (even though I specifically requested the deduction several times).

As of my last check, my gross pay is about $25,000 and my federal withholdings are about $3,000. (I have a much better job starting in January.)

Unfortunately, as I am under 25 and don't have any children, I don't qualify for any earned income credits or child tax credits. I have, however, paid well over $2,500 in student loan interest throughout the year and purchased a home in May.

What will I owe for state and federal taxes, and are there any tax credits that I could qualify for?

Answer 1

For state tax, you'll most likely owe around $630. Employers often don't take out taxes for areas other than where they are - if they don't, you are responsible for making estimated payments, in your case to IL.

You'll probably have a federal refund big enough to pay what you owe to the state. You can deduct some of the student interest as an adjustment, whether you itemize or not. And if you itemize, you can deduct mortgage interest and real estate taxes.

Answer 2

You were probably mistreated as an independent contractor and didn't know what the deal was. I have a canned explanation to apparently clueless independent contractors:

Some employers try to get around paying employment taxes (social security and unemployment) and other employee benefits like workers compensation insurance by improperly classifying employees as independent contractors. The basic issue is the amount of control the employer has over the worker. If you are required to show up for work--personally--at a particular time, punch the clock, use the employer’s equipment and are paid an hourly rate, or another set rate based on time served, you are an employee. If you didn't understand the difference when you posed your question, I would be even more convinced that you are an employee. What is your preference, Slotted or Phillips? Complete an IRS Form SS-8 to get an official ruling on your status. This will help you get unemployment if you get fired. When you file your income tax return, you can attach Form 8919 Uncollected Social Security and Medicare Tax on Wages and only pay the employee's half of social security. You will still have to cough up all the income tax. IRS and the states are stepping up enforcement in this abuse area.

You will have to report your earnings in both states but will be entitled to a credit in Illinois for taxes paid in Missouri.

Answer 3

No one can tell you the answer to your question because you have no idea what your adjusted gross income will be yet. Once you know that number, then you look for allowable deductions, and go from there.