Estimating tax returns for 2010?

[Pikarya]

I've never successfully been able to figure out how to use this tool properly. Last year I used it and I got an entirely different number in terms of my return total.

Link here: http://www.hrblock.com/free-tax-tips...&wages=&tpage=

Last year was a pretty simple year for me. I just need to file for two companies I worked for.

Any ideas on doing this properly to get an estimate? (I'm doing my taxes next week anyways.)

Thanks

[Skyylya]

it said my return was going to be 7500....it's gotta be wrong. I'd just wait until you go do it yourself lol.

It probably over inflates it so you're so eager to go to HR block to have them do your return.

[Gwynplaine]

Taxes are intended to be non-objective and incomprehensible. So don't bother trying too hard. No one knows.

[Meat]

are you guys really getting money back? you realize all you're doing is giving the govt an interest free loan on money that should be invested.

[Souj]

are you guys really getting money back?

Yes, they are really getting money back.
They gave the government money, and the government gave some of it back.
How or why has no relation to whatever antigovernment argument you're trying to start.

[Meat]

step 1) don't give the govt money
step 2) ???
step 3) profit

ps. step 2 is invest it.

[archibaldcrane]

Pretty sure Meat just means you should claim a bunch of withholding exemptions on your W-4 and save up money to pay your income tax bill at the end of the year.

[Souj]

If that's what he was trying to say, then that makes more sense.

[Woozie]

Why is it a big deal either way? Assuming they aren't taking out so much money that I can't pay my day to day expenses.

[RKenshin]

Pretty sure Meat just means you should claim a bunch of withholding exemptions on your W-4 and save up money to pay your income tax bill at the end of the year.

To my knowledge, if at year-end you haven't already paid at least 90% of your total amount owed to the IRS for the year, you end up having to pay penalties. This is as long as you're not a 1099 employee (aka you're self-employed), as they typically pay their taxes in one lump some at the end of the year. But if you're employed, you can't simply have them not take any federal withholding at all from your checks and then just pay them in a lump sum at the end.

Ideally, what you should do (and I think Meat is advising) is to aim to minimize your refund as much as possible (or ensure you won't owe more than 10% of the total tax bill for the year). Every dollar you get refunded at the end of the year is money you lent to the government interest-free.

The government just about always withholds a good amount more money than necessary. The taxes withheld from each check do not typically count any deductions you receive, even though just about everyone gets a standard deduction ($5800 for 2011, not to be confused with 2010's $5700 that you would use for filing taxes now) and a personal exemption ($3700 for 2011). You only don't get a standard deduction if you itemize your deductions and the number itemized ends up being higher than the standard deduction (it's either one or the other, whichever is higher, you can't get both). You're given 1 personal exemption if you can't be filed as a dependent on someone else's tax return (IE, your parent), and more if you meet other standards.

So, for example, if Bob is making $50,000 a year he will have amounts withheld from each pay check as if he doesn't have any deductions. Which means, over the year he'll pay the government $8,625 (assuming single, not married). But when he files for taxes, he really only had to pay the government taxes for at most $40,500 of his salary [$50,000 - standard $5,800 - 1 personal exemption $3,700] (assuming not a dependent). So he really only owed $6,250, entitling a $2,375 refund. Which also means he lent the government $2,375 interest-free.

To avoid/minimize that, under the same situation, he could have claimed 3 personal exemptions (aka, personal allowance, same thing) on his employer W4. Each personal exemption brings the amount taxed on his salary down by $3,700, meaning if he claimed 3 then instead of being taxed on earning $50,000 throughout the year he'll be taxed on $38,900 [$50,000 - (3 * $3,700 personal exemption)]. Under that situation, he would owe $400 at the end of the year but have an extra $2,775 dollars to earn interest on throughout the year (and pay no penalties).

Not really sure if that was helpful, but... yeah lol.

I'm a little new to this tax subject so I could be mistaken on some parts, but pretty sure all of the above is correct.


EDIT:

Why is it a big deal either way? Assuming they aren't taking out so much money that I can't pay my day to day expenses.

It really isn't a major difference either way for most people. Like you said, as long as you can get by and pay your bills, it's not a big deal.

It's most valuable if you're living paycheck to paycheck, as the extra ~3-10%+ cash in each paycheck can be hugely helpful.

If you're decent with money, depending on your salary you could also make an extra few hundred dollars in interest over the course of the year with minimal risk (which while not game-breaking, is nice... and adds up over the years).

Personally, adjusting my allowances for both federal and state withholding increased my monthly take-home by a smidge over $200. I probably won't invest the extra to earn the keep, but I love the extra flexibility in my monthly budget. I'll still get a few hundred $ refund at the end of the year too.

[Olo401]

I deliberately claim 0 exemptions, and it's a win-win situation as far as I'm concerned. They take a little extra out of the paycheck, but that's fine I make enough where I can afford it. The gov't gets the interest from keeping it escrow, and I get a gigantic refund each year.

[Uzor]

I intentionally pay too much tax since I suck at saving money. It's like Christmas in the middle of the year when the tax return comes.

My friend's boss is the same way, he pays twice his taxes because that makes him happier when the tax return comes.

Yes, yes, I know, technically it is smarter to not pay too much and invest the money in to something, but I end up wasting it on worthless shit like candy, ice cream or alcohol instead of investing it if I keep it.

[Yabby]

I'm a 1099 so i normally take about 30% of my paycheck and invest it during the year. Normally by the end of the year I've invested about 25~30 grand depending on business. That money is normally about 35~40 by that time. I'm not really sure how i would do my taxes if i were not a 1099, but i do enjoy the extra money by the end of the year.

[Coren]

I intentionally pay too much tax since I suck at saving money. It's like Christmas in the middle of the year when the tax return comes.

My friend's boss is the same way, he pays twice his taxes because that makes him happier when the tax return comes.

Yes, yes, I know, technically it is smarter to not pay too much and invest the money in to something, but I end up wasting it on worthless shit like candy, ice cream or alcohol instead of investing it if I keep it.

This is why the government *should* take more money, and give it back. 99% of people are either too stupid or lazy to save money over the year. Aside from that, assuming you get paid near the national average, and get that $2k refund or whatever the example was above, you're gonna make $100-$200 on investing that money throughout the year (assuming you're not in 2008 where everything dropped like a rock), so it's hardly worth it.

[Uzor]

Difference is that I'm aware that I waste it on useless shit and intentionally pay too much, as opposed to those protesting they never have any money, on top of having to pay more tax instead of getting a refund

[Dolmen]

First, that website was dead on in calculating my refund. I compared it to our software at work for verification on my refund amount. Ultimately, the ideal situation with a tax return is to owe as much as possible without penalty. From a tax payer's perspective, it's generally to receive as much as humanly possible. I claim 0/0 on my wages because I regularly have capital gains I want covered and two bonuses that do not have income taxes applied to them. Most people could/should claim 1/1 (depending on state), or even 2 for federal, and owe a little/get a small refund. It's tricky though as some states are really weird in their tax structures. For instance, I always owe Virginia because you really do not get that many deductions/credits from them.

[Skyylya]

i'm no tax specialist i always just have HR block do it...but looking at mine and my wifes w2. Should i be including the medicare and SS tax taken out when i'm putting in how much i paid in taxes....or just the federal income tax part? That would make a big difference in why mine came out so high.

[Dolmen]

i'm no tax specialist i always just have HR block do it...but looking at mine and my wifes w2. Should i be including the medicare and SS tax taken out when i'm putting in how much i paid in taxes....or just the federal income tax part? That would make a big difference in why mine came out so high.

Federal taxes only (box 2). FICA/Medicare are set percentages no matter what your income level.

[Skyylya]

this thing is apparently pretty fricken accurate. I put my stuff in the right way and it was 10$ off. I still haev a few things i may be able to claim to go with itemized deductions which could change it.

but this thing said i owe 431...i actually owe 421 using the standard deduction.

And i thought i got taxed to hell last year...i still owe more. /sadface

[takethistoyourgrave]

I always used TaxCaster at:

http://turbotax.intuit.com/tax-tools/

Also if you fill in your shit at:

http://www.irs.gov/individuals/artic...=96196,00.html

It will give you a good idea of how many deductions to claim so that neither you or the govt will owe each other very much money.

I echo the sentiment that people who pay too much tax and then get a huge refund are (typically) very ill-informed.