Just did taxes...annoyed. Other people in the same boat?

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:the irs withholding tables were totally wrong for many people

i owe 9k, last year got a 4k refund

luckily i had it all saved expecting something like this but will be very unhappy if they actually enforce a penalty

We have it saved, but not specifically for this. We have adjusted our withholding for this year and canceled planning for a 25th wedding anniversary trip for this summer.

The people posting on this thread now are the type of people who do their taxes in February. Wait until the majority of the US population (who wait til late March/April) realize that they've been withholding too little and their expected refund is actually a required tax payment.

recession.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

It has always been the case that dual income households need to review the withholding tables and adjust accordingly. The issue this year is that, with no changes to to their W4s, an unprecedented number of taxpayers went from being overwithheld to being underwithheld. That's an issue with the withholding tables.

The fact that the IRS is temporarily lowering the safe harbor threshold to waive the underpayment penalty for some taxpayers and is, for the first time, allowing employees to adjust their W4s up until May 2019 if they find, upon filing taxes, that they underwithheld suggests they themselves agree that the 2018 tables have issues.

It's also worth noting that even for those who were so inclined--I usually run our taxes mid-year since I am self-employed so that we can adjust the last two estimates--there was no way to see the draft tax forms until the fall, so even if you did do this and discovered at that point that you had underwithheld significantly, there wasn't much time to correct it. We bumped up our last two estimates and threw additional money into the final couple of months of payroll withholding for DH so we will only owe a few hundred (with a total tax liability that's about the same as last year since the SALT changes wiped out any gain from the tax cuts for us), but many people are just finding out now.

Yes, but most people, even high earners, don't do that. They don't review the withholding tables. They just guesstimate adjusting their taxes if they owed a lot the previous year and then they just add money based on what they owed last year (e.g. "we owed $5, so we each withheld $200 extra a month"). I ran our taxes a few months before the end of the year using the tax brackets shown above and the tax calculator on the IRS web-site. They were rough estimates, but I used them to tweak our taxes. We will get about $500 back federal and $1000 back state, so it worked pretty well, getting that close considering the changes.

PP you're quoting, and to be clear--my point was that you shouldn't have to review the withholding tables every year. That's just something you do when you start a new job to ensure you're withholding adequately. After that, if you don't change anything on your W-4 and your income doesn't change, you should be able to reliably assume that your refund or payment will be similar to what it was the year before, even if tax rates and withholding rates change (as they do each year). The fact that this was not true this year speaks to issues with the tables--it's not just because "that's how withholding tables work."

[Anonymous]

Anonymous wrote:I feel like we've been lied to.

And this is the first time Trump has lied....Mexico is still paying for the wall!

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

It has always been the case that dual income households need to review the withholding tables and adjust accordingly. The issue this year is that, with no changes to to their W4s, an unprecedented number of taxpayers went from being overwithheld to being underwithheld. That's an issue with the withholding tables.

The fact that the IRS is temporarily lowering the safe harbor threshold to waive the underpayment penalty for some taxpayers and is, for the first time, allowing employees to adjust their W4s up until May 2019 if they find, upon filing taxes, that they underwithheld suggests they themselves agree that the 2018 tables have issues.

It's also worth noting that even for those who were so inclined--I usually run our taxes mid-year since I am self-employed so that we can adjust the last two estimates--there was no way to see the draft tax forms until the fall, so even if you did do this and discovered at that point that you had underwithheld significantly, there wasn't much time to correct it. We bumped up our last two estimates and threw additional money into the final couple of months of payroll withholding for DH so we will only owe a few hundred (with a total tax liability that's about the same as last year since the SALT changes wiped out any gain from the tax cuts for us), but many people are just finding out now.

Yes, but most people, even high earners, don't do that. They don't review the withholding tables. They just guesstimate adjusting their taxes if they owed a lot the previous year and then they just add money based on what they owed last year (e.g. "we owed $5, so we each withheld $200 extra a month"). I ran our taxes a few months before the end of the year using the tax brackets shown above and the tax calculator on the IRS web-site. They were rough estimates, but I used them to tweak our taxes. We will get about $500 back federal and $1000 back state, so it worked pretty well, getting that close considering the changes.

PP you're quoting, and to be clear--my point was that you shouldn't have to review the withholding tables every year. That's just something you do when you start a new job to ensure you're withholding adequately. After that, if you don't change anything on your W-4 and your income doesn't change, you should be able to reliably assume that your refund or payment will be similar to what it was the year before, even if tax rates and withholding rates change (as they do each year). The fact that this was not true this year speaks to issues with the tables--it's not just because "that's how withholding tables work."

You are spot on! I wish I could say it was just incompetence - but I believe there was political motivation associated with it..... and there should not be.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:the irs withholding tables were totally wrong for many people

i owe 9k, last year got a 4k refund

luckily i had it all saved expecting something like this but will be very unhappy if they actually enforce a penalty

We have it saved, but not specifically for this. We have adjusted our withholding for this year and canceled planning for a 25th wedding anniversary trip for this summer.

The people posting on this thread now are the type of people who do their taxes in February. Wait until the majority of the US population (who wait til late March/April) realize that they've been withholding too little and their expected refund is actually a required tax payment.

recession.

Is there an article or something somewhere that says it would be the majority of the population? I understand a lot of DCUM folks having issues since incomes are higher around here, but is it really the whole population?

[Anonymous]

Accountant has us pay $2000 total more in quarterly estimated taxes in 2018. I'm really, really hoping he estimated this correctly but I'm worried now that I'm hearing all these stories.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:the irs withholding tables were totally wrong for many people

i owe 9k, last year got a 4k refund

luckily i had it all saved expecting something like this but will be very unhappy if they actually enforce a penalty

We have it saved, but not specifically for this. We have adjusted our withholding for this year and canceled planning for a 25th wedding anniversary trip for this summer.

The people posting on this thread now are the type of people who do their taxes in February. Wait until the majority of the US population (who wait til late March/April) realize that they've been withholding too little and their expected refund is actually a required tax payment.

recession.

Is there an article or something somewhere that says it would be the majority of the population? I understand a lot of DCUM folks having issues since incomes are higher around here, but is it really the whole population?

So just doing a quick and very superficial scan of the IRS reports of taxes filed in 2017 and 2018, approximately 63M (20%) were filed in February, approximately 103M (34%) were filed in March and approximately 140M (46%)were filed in April. So, I think that definitely says the majority filed in late March or April.

https://www.irs.gov/newsroom/2018-and-prior-year-filing-season-statistics

[Anonymous]

I think PP was questioning whether a majority of people will owe rather than getting a refund. We won't know that for a while.

[Anonymous]

The problem is that for many people, taxable income increased due to loss of the exemptions. While rates are lower, they are only lower by a couple percentage points. Then withholding was decreased. What this amounts to is higher taxable income at a lower rate which only increased taxes YoY a little. Then tax withholding went down a bunch.

[Anonymous]

All this was expected. GAO did a report and ran a simulation that predicted this: https://www.forbes.com/sites/ashleaebeling/2018/07/31/gao-dont-count-on-a-tax-refund-next-april/#58a5205438af

But just to put this "problem" in perspective before the change in law, about 18% of the filers had taxes due. As a result of the new tables this number rises to 21%. Almost 70%+ will continue to get a refund, as in most of the country will not notice.

That additional 3% who are now being hit with a tax bill are probably heavily skewed towards the DCUM crowd (high income dual earners who used to itemize).

[Anonymous]

Anonymous wrote:All this was expected. GAO did a report and ran a simulation that predicted this: https://www.forbes.com/sites/ashleaebeling/2018/07/31/gao-dont-count-on-a-tax-refund-next-april/#58a5205438af

But just to put this "problem" in perspective before the change in law, about 18% of the filers had taxes due. As a result of the new tables this number rises to 21%. Almost 70%+ will continue to get a refund, as in most of the country will not notice.

That additional 3% who are now being hit with a tax bill are probably heavily skewed towards the DCUM crowd (high income dual earners who used to itemize).

This, and also the fact that it is skewed towards people who live in states with income taxes (Maryland is projected to be one of the hardest hit states) and people with children (who, at higher tax brackets, lose money relative by getting the child credit instead of an exemption--at the lower tax brackets, the credit is worth more than the exemptions were). So it's a perfect storm for DCUM, but will have less of an impact on households with HHI below $75K, especially in states with low/no property and income taxes where few people were itemizing anyway. For some households there, the higher standard deduction coupled with new rates and credits will mean much lower taxes.

[Anonymous]

Anonymous wrote:

Anonymous wrote:All this was expected. GAO did a report and ran a simulation that predicted this: https://www.forbes.com/sites/ashleaebeling/2018/07/31/gao-dont-count-on-a-tax-refund-next-april/#58a5205438af

But just to put this "problem" in perspective before the change in law, about 18% of the filers had taxes due. As a result of the new tables this number rises to 21%. Almost 70%+ will continue to get a refund, as in most of the country will not notice.

That additional 3% who are now being hit with a tax bill are probably heavily skewed towards the DCUM crowd (high income dual earners who used to itemize).

This, and also the fact that it is skewed towards people who live in states with income taxes (Maryland is projected to be one of the hardest hit states) and people with children (who, at higher tax brackets, lose money relative by getting the child credit instead of an exemption--at the lower tax brackets, the credit is worth more than the exemptions were). So it's a perfect storm for DCUM, but will have less of an impact on households with HHI below $75K, especially in states with low/no property and income taxes where few people were itemizing anyway. For some households there, the higher standard deduction coupled with new rates and credits will mean much lower taxes.

We live in DC and come out absolute winners. Will save about $20k from the change in law (primarily AMT + lower brackets) relative to the previous tax law. However, the tax tables have screwed us somewhat and have to write a $6k check in April (but in the grand scheme of things no complaints).

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:the irs withholding tables were totally wrong for many people

i owe 9k, last year got a 4k refund

luckily i had it all saved expecting something like this but will be very unhappy if they actually enforce a penalty

We have it saved, but not specifically for this. We have adjusted our withholding for this year and canceled planning for a 25th wedding anniversary trip for this summer.

The people posting on this thread now are the type of people who do their taxes in February. Wait until the majority of the US population (who wait til late March/April) realize that they've been withholding too little and their expected refund is actually a required tax payment.

recession.

Is there an article or something somewhere that says it would be the majority of the population? I understand a lot of DCUM folks having issues since incomes are higher around here, but is it really the whole population?

There was a lot published at the time that this tax bill would hit the "donut" hard .. i.e. educated, UMC couple in high cost of living (aka blue) areas.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:All this was expected. GAO did a report and ran a simulation that predicted this: https://www.forbes.com/sites/ashleaebeling/2018/07/31/gao-dont-count-on-a-tax-refund-next-april/#58a5205438af

But just to put this "problem" in perspective before the change in law, about 18% of the filers had taxes due. As a result of the new tables this number rises to 21%. Almost 70%+ will continue to get a refund, as in most of the country will not notice.

That additional 3% who are now being hit with a tax bill are probably heavily skewed towards the DCUM crowd (high income dual earners who used to itemize).

This, and also the fact that it is skewed towards people who live in states with income taxes (Maryland is projected to be one of the hardest hit states) and people with children (who, at higher tax brackets, lose money relative by getting the child credit instead of an exemption--at the lower tax brackets, the credit is worth more than the exemptions were). So it's a perfect storm for DCUM, but will have less of an impact on households with HHI below $75K, especially in states with low/no property and income taxes where few people were itemizing anyway. For some households there, the higher standard deduction coupled with new rates and credits will mean much lower taxes.

We live in DC and come out absolute winners. Will save about $20k from the change in law (primarily AMT + lower brackets) relative to the previous tax law. However, the tax tables have screwed us somewhat and have to write a $6k check in April (but in the grand scheme of things no complaints).

The people that are not winning are those of us who weren’t wealthy enough to hit the amt but live in high tax states and are losing a chunk under the SALT. Which seems like a truly odd result, to have the lower echelon of the UMC pay more while everyone else pays less. My effective tax rate increased from 18% to 22%.

[Anonymous]

Yes, from reading these threads it seems like the 180k ish HHI people are paying more. They would never have paid AMT at that income but losing a lot of deductions probably increased their taxable income. And an extra few thousand dollars isn’t peanuts to that income in a HCOL area.