I accepted a much better paying job but I'm not bringing home that much more...what should I do?

Question

I accepted a better paying job because my common law husband is unable to work due to medical issues. I'm actually only bringing home 600.00 more a month. What deductions should I have taken out of my check to get my tax rate down.

I am presently claiming 0 head of household. In previous years I claimed 1. I used to pay for half of my medical insurance. My present employer pays all of my our medical insurance. I'm not having money into retirement yet but my employer is putting money into my retirement. I just started having 150.00 a month into a medical flex plan. What else can I do to be taxed at a lower rate but not have to pay a bunch of taxes at the end of the year.

Answer 1

Are you trying to lower your tax rate, increase your take home pay, or simply save on your taxes?

To lower your tax rate, the only thing you can really do is to work less or take a lower paying job. Your tax rate will probably go down, but that probably won't help your situation much.

To increase your take home pay, update your W4 to reflect Married Filing Joint with 2 exemptions (plus any additional exemptions if you have children). If you have been claiming '0' as Head of Household, then they are taking out much too much in taxes. You will probably be due a big refund. If you are married under common law marriage, then you should be filing taxes as Married, and not as Head of Household.

If you file Head of Household with no dependants, then the first $7,850 of what you make is not taxable (this assumes you do not itemize deductions).
If you file Married Filing Jointly, then your first $10,700 is not taxable (again, assumes you do not itemize deductions) and an additional $6,800 woud not be taxable, for a total of $17,500 of non-taxable income. At a 25% tax bracket, that means that you had an extra $2,412.50 was deducted from your paychecks lasat year. You will get this money back when you file your return, but that means that you gave the government an interest-free loan of about $2,400. If you update your W4, then you will see an immidiate increase in the amount of take home pay by about $200 a month. Please remember that these are rough numbers and that your actual numbers may be a bit different.

Another way to lower your tax burden is to start contributing into your retirement account at work. Every dollar that you contribute (and not your employer) reduces your taxable income. Also, depending on your income level, you may be able to get a tax credit for putting into a retirement account. This does mean less money to spend now, but when you are aged 65 you will be glad that you have money saved up so that you can afford to retire.

Lastly, how long have you two been married under common law? If you were common law at the end of last year (and the two years before that) and you filed Head of Household or seperate returns, you may want to investigate amending your previous year's tax returns. Not only can you get more money back (if you are entitled to it), but you also get some interest paid on what was not paid back to you. Talk with a professional about doing this. They will often look over your prior year's taxes for free. You pay them if you actually do refile a return.

Answer 2

You say that he is your common law husband. If that is true, you are married for tax purposes and cannot file as Head of Household. You'll generally be better off filing a joint return with your husband; your ONLY other option is Married Filing Separately and that is seldom a good idea.

For your withholding since you are married, you should be filling out your W-4 as Married and claim at least 2 withholding allowances. Since your husband does not work you should be safe claiming as many as 3. That would maximize your take-home pay though there is a very slight risk of a SMALL tax bill at filing time; that would be less than $100 in nearly all cases.

Do make SURE that you use all of that money in the Flex plan during the year! Since you have committed to spend $1,800 per year, you do NOT have to wait until the money is in the plan to start spending it -- you could use the entire $1,800 immediately after the New Year if you needed to. However if you have anything left in it at the end of the plan year, that will be forfeit to your employer at the end of the year. They are NOT allowed to return the excess money to you or roll it over into the next plan year.

Answer 3

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Answer 4

When you file, your choices are MFJ and MFS. If you live with your husband, you are NOT eligible for HOH.

Filing is different from the W-4 form which asks if you are married or single and how many withholding allowances you want. Single 0 is probably the cause of high withholding. Married 1 or Married 2 is probably what you are looking for.