Curious about why people owe taxes

When I was single I also always got small refunds (under $1000) back every year.  I claimed zero exemptions for awhile too, plus on my job, I was heavily compensated by bonus, and bonuses are taxed at 40% out of payroll - not at your tax bracket like salary is.
 
When I owned property, I started getting considerable refunds due to mortgage interest and real estate tax deductions.  They were smaller at the condo, but when I bought my house (as a single female) my refunds were usually over $2000 per year.  By now I was claiming 1 exemption (myself). 
 
This past tax season was the first year I was "married filing jointly" and my husband is self employed.  We had double mortgage interest and real estate tax deductions, plus we tithed a considerable amount of money to our church and private charities last year.  Our refund this year is going to be about $3500 between federal and state.  It would have been more, but my husband didn't pay taxes on the dividends he took out of his business last year.  Also, he doesn't get to claim his daughter since she doesn't primarily live with him, so that didn't impact our refund.
 
I do think that the "get married, it's a tax break" is a load of hooey.  I expect that next year we'll either get a paltry refund or wind up owing some money.

ORIGINAL: cakana

have a former step-daughter who does this yearly. She works off and on throughout the year, claims Earned Income Credit on her taxes (3 kids, she's not married), and gets back more than she "earned" the whole year.

Tina - that's one I don't get either.  I worked with a woman who had the same situation and at first I thought she must be doing something wrong on her taxes, but she hadn't. 

 
This was not something I really paid attention too until my cousin got money back this year and she hardly worked AT ALL. She became a drug addict last year and got fired from her job in JANUARY. She started working again THIS year. Yet she still managed to get back almost $4000.00. She has 2 kids. I couldn't believe it. Are you kidding me? I was completely confused. I still don't understand how she could get that much back, but she did. She didn't even have the kids in her custody until this year. My aunt and my mom had the kids all year because my cousin left them in January after she got fired. She still claimed them, or course, and got back all that money.
 
Meanwhile, I claim 0 and only got back $32.00 Federal refund and $274.00 State. I would have gotten more, but I changed my exemptions at one point last year and forgot to change them back for 4 months. [:@]  That's what I get for never looking at my damn pay stubs. I would have noticed sooner. I just thought it was all my overtime.

ORIGINAL: g33

When I was single I also always got small refunds (under $1000) back every year.  I claimed zero exemptions for awhile too, plus on my job, I was heavily compensated by bonus, and bonuses are taxed at 40% out of payroll - not at your tax bracket like salary is.

 
Can you further explain this? I just received a bonus and my coworkers had told me to change my taxes to Exempt so that I would get most of it. I was nervous to do this because I thought it would mean I would owe at the end of the year. They all assured me that I wouldn't, so I did it. They did take SOME out of my bonus, but not a whole lot. Those who didn't change their taxes got about 40% taken out. Do you know if this will mean I will have to owe at the end of next year?

ORIGINAL: snownose
Btw., if you have more kids, you get an even bigger tax break......[][]

Anyone want my kids?  Please?  []

Anyone want my kids?  Please? 

i'd be willing to let you keep them. i just want to use them as a tax deduction.[]

We got slammed this year because we claimed the same amount of exemptions we always do (and what you come up with if you do the little worksheet the provide you with) but the big difference this year vs. previous years was that neither of us was in school and we both worked full time all year. That's never happened before since we've been married. We'd always gotten refunds in the past and this year we're paying $1701.00.

For us it's about not being able to claim any deductions (hardly any). Our tax liability is not cushioned at all, though on the upside the forms were really easy to fill out! If you have kids, deductions. If you own property, deductions. If you are in school, deductions. If you save money but make below a certain income (we were $2000 above that cut-off), deductions. Us? No deductions. Okay, one deduction: we can deduct our student loan interest payments.

So we have to adjust our exemptions. DH is under orders to do that when he fills out his tax paperwork for his "new" job (he's getting hired permanent at a place he's been temping).

Do you mean owe as in part of your paycheck is taken or owe as in when you file you still have to pay more instead of getting some back?

I've always had federal, state, and city taken out of my paycheck automatically.  I always allow them to take the max, so I hopefully don't have to pay more in April and get bigger refunds.  This year I had to pay the city $24 b/c my employer did not take out enough even though I chose to have the max taken from each paycheck.

I think people who owe a lot are people who's employers don't take out enough, or people who are self-employed.  My husband owed the city and state because his employers only withheld federal taxes.  I have friends who've made money from their parents' home businesses who've had to pay each April b/c their parents weren't withholding taxes.

Alot of tax payment vs refund is based upon how your employer withholds for you.  I plan out my withholding structure so that I can almost break even each year.  This year I owed $116.  Not bad for my estimating. 
 
Owning a home is a great deduction and I plan on getting into the "home owners" bracket soon.  When I do I will be counting on the yearly refund.  Having children is yet another great deduction. 

I think people who owe a lot are people who's employers don't take out enough, or people who are self-employed.

 
Well that is not always the case.  You are forgetting about Interest income, dividend income and capital gains,  all of which usually aren't taxed when paid. 

Do you mean owe as in part of your paycheck is taken or owe as in when you file you still have to pay more instead of getting some back?

i mean they rape me every paycheck and then again at the end of the year.

i claim married and one, and my wife claims married and none. we can possibly have slightly more taken out each week, but i like to eat at least once a day.

ORIGINAL: Xerxes
Owning a home is a great deduction and I plan on getting into the "home owners" bracket soon. 

i wouldnt count a refund. we never get one. it seems like a great deduction, until you are paying the mortgage and realize how little the deduction is compared to what you pay out each month.

ORIGINAL: ashland

ORIGINAL: g33

When I was single I also always got small refunds (under $1000) back every year.  I claimed zero exemptions for awhile too, plus on my job, I was heavily compensated by bonus, and bonuses are taxed at 40% out of payroll - not at your tax bracket like salary is.

Can you further explain this? I just received a bonus and my coworkers had told me to change my taxes to Exempt so that I would get most of it. I was nervous to do this because I thought it would mean I would owe at the end of the year. They all assured me that I wouldn't, so I did it. They did take SOME out of my bonus, but not a whole lot. Those who didn't change their taxes got about 40% taken out. Do you know if this will mean I will have to owe at the end of next year?

 
On your W-4  you're entitled to claim tax exemptions, which means that you hold onto more of your money.  As a single person you can claim 0 exemptions, which means that the government takes out the maximum they can from your check.  You also can always claim yourself, which is 1 exemption.  When you marry you can claim your spouse (2) and when you have children you can claim them also (3).  If you're caring for elderly parents and they are considered a dependent, you can claim them also.  The more exemptions that you claim, the more money you keep out of your paycheck.  The drawback is that you *may* owe taxes at the end of the year. 
 
Bonuses are always withheld at a higher rate than regular salary.  My regular salary I have taxes deducted at about 27%.  Bonuses take 40%.  I'm not sure what the difference is or why, but it's just something I've noticed.  I really don't think exemptions are going to affect how bonuses are taxed, though the more exemptions you claim, the more you'll keep up front.
 
From your post I can't really understand what you did because you can't just change your taxes to "exempt".  Did you claim yourself as a dependent when you previously hadn't been?  If you claimed an exemption, then yes you would keep more of your bonus up front, and depending on the size of your bonus compared to your salary, you *may* owe, but then again you may not.  It depends on what else you have going on - are you taking any deductions for property taxes, mortgage interest, earned income credit for children, did you sell any investments that incurred capital gains, etc etc etc.  All of those factor in to whether or not you'll have to pay at the end of the year. 

ORIGINAL: g33

ORIGINAL: ashland

ORIGINAL: g33

When I was single I also always got small refunds (under $1000) back every year.  I claimed zero exemptions for awhile too, plus on my job, I was heavily compensated by bonus, and bonuses are taxed at 40% out of payroll - not at your tax bracket like salary is.

Can you further explain this? I just received a bonus and my coworkers had told me to change my taxes to Exempt so that I would get most of it. I was nervous to do this because I thought it would mean I would owe at the end of the year. They all assured me that I wouldn't, so I did it. They did take SOME out of my bonus, but not a whole lot. Those who didn't change their taxes got about 40% taken out. Do you know if this will mean I will have to owe at the end of next year?

On your W-4  you're entitled to claim tax exemptions, which means that you hold onto more of your money.  As a single person you can claim 0 exemptions, which means that the government takes out the maximum they can from your check.  You also can always claim yourself, which is 1 exemption.  When you marry you can claim your spouse (2) and when you have children you can claim them also (3).  If you're caring for elderly parents and they are considered a dependent, you can claim them also.  The more exemptions that you claim, the more money you keep out of your paycheck.  The drawback is that you *may* owe taxes at the end of the year. 

Bonuses are always withheld at a higher rate than regular salary.  My regular salary I have taxes deducted at about 27%.  Bonuses take 40%.  I'm not sure what the difference is or why, but it's just something I've noticed.  I really don't think exemptions are going to affect how bonuses are taxed, though the more exemptions you claim, the more you'll keep up front.

From your post I can't really understand what you did because you can't just change your taxes to "exempt".  Did you claim yourself as a dependent when you previously hadn't been?  If you claimed an exemption, then yes you would keep more of your bonus up front, and depending on the size of your bonus compared to your salary, you *may* owe, but then again you may not.  It depends on what else you have going on - are you taking any deductions for property taxes, mortgage interest, earned income credit for children, did you sell any investments that incurred capital gains, etc etc etc.  All of those factor in to whether or not you'll have to pay at the end of the year. 

 
Thanks Gina!
 
Yes, I changed how much I was claiming. We're able to change this number as many times as we want during the year. So if I ever want more money on my paycheck, I can change it from 0 to 10 if I want too. For example, last year I needed to get a bigger paycheck at one point so I changed it from 1 to 10. The problem was, I completely forgot to change it back. I have direct deposit and I never look at my pay stubs. I was working a lot of over time and thought that's what the extra money was for. Until I happened to open a stub one day and noticed that I had never changed it back. I thought for sure I was gonna owe this year because of that. Instead, I just got back a very small refund.
 
What I did in terms of the bonus, along with most of my coworkers, was change it from 0 to Exempt. So instead of taking a huge chunk of my bonus, they only took about $200.00 of it.

Bradley, the reason you get raped is because, you and DW are working, no small children, and you automatically fall into a higher tax bracket due to two incomes combined..........
 
 
Welcome to my world.............[8|]

ORIGINAL: snownose

Bradley, the reason you get raped is because, you and DW are working, no small children, and you automatically fall into a higher tax bracket due to two incomes combined..........


Welcome to my world.............[8|]

our combined income is less than many many people's single income.

besides i know why i am being screwed. but i dont have to like it. [&:]

we will never have any kids, and cant afford to go a single income.