Here is it, almost the end of tax year 2000. I have this nagging feeling that I’m not paying enough income taxes. Usually I would just look back at last year’s numbers and draw some kind of rough parallel, but this year is very different. I started a new (better paying) job on Jan. 3rd and I suspect that I’ve been thrust into a higher tax bracket. I’m claiming the same number of witholding exemption whatchamacallit thingies as I always have but I’m now in the 10th year of my mortgage note, so I’ll be claiming less & less of a write-off from mortgage intrest now & as the years go by.
Is there some web site where I can punch in the YTD numbers from my pay stub and get a ballpark figure to let me know if I’m seriously underpaying?
Are you packing enough fudge?
I’m speaking generally, and you should certainly find a source that can check things specifically for your situation. And I assume you’re talking U.S. tax.
Generally speaking, the additional change to a higher-paying job is covered by the withholding formula, so that change alone should not cause you concern. The reduction of mortgage interest from one year to the next will not normally be such a substantial change as to warrent concern.
Finally, however, and the most important point: there is a “safe harbor”. There will be no penalties if you make the “required annual payment”, which is:
- The amount of tax withheld is at least 90% of the amount of tax shown on the return for that year; or
- The amount of tax withheld is at least 100%* of the amount of tax shown on the return fo the prior year.
So the jump in tax from 1999 to 2000 is less than 10%, you should be OK. Or, if the amount of withholding in 2000 is at least as much as would cover the tax you paid in 1999, you’re OK.
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- The tax rules are never simple. If your taxable income exceeds $150,000, then the 100% in the formula above is changed to 108.6% for the year 2000, 110% for 2001, 112% for 2002, and 110% for 2003. (I bet this is from the tax simplification legislation.) I figure, if your taxable income exceeds $150,000 you’ve got a tax preparer to whom you can ask your question, and you wouldn’t need to post it here.
There is also no penalty if the tax due (after considering your withholdings) tax is less than $1,000.
[Edited by CKDextHavn on 10-19-2000 at 10:55 AM]
Dex: That was an enlightening, informative answer.
Mad: What??
Whenever I travel I always buy my confections locally, so I don’t have to pack it with my other gear. It would probably melt all over the toiletries anyway.