This is what I basically do. Maybe it’s because I’m Canadian. From what I can see, my T-4 is pretty simple to fill out. I go to H&R block (or whatever) give them $30 and they tell me how much money I’m getting back in my returns. Mostly it’s done on computer.
W2 forms, as well as all of the “pre-tax” documents you file are only for “guesstimates” over the year. When all’s said and done you have a tax bill. All the forms do is take out a bit each week so that you aren’t hit with a huge bill (since you pissed all your money away) at the end of the year.
The IRS doesn’t pretend to know your entire situation (kids, expenses, etc) they just hope to hit the big ones.
I gave up on W4s years ago. I claim M-0 and have and extra $50 withheld from each paycheck. This and my husband claiming M-0 brings us close to breaking even. And besides the 2 of us, we have a kid and 2 mortgage loans we can write off…
Hate taxes. Went to the accountant on Thursday, found out how bad the bill was gonna be, paid accountant, talked to him about whether we can fix the fucking awful mess Mr P made of his GST returns, had fond thoughts of accountant.
Today I looked at the interim paperwork. Am very cross with accountant. Accountant qualifies as complete fucking fool. He’s got Mr P earning $1300 more than Mr P actually did. He’s allowed no deductions whatsoever. Our fucking tax bill is approximately $600 more than it should be if we use the accountant’s figures. Thought I went to accountant so as to avoid horrible fucking messes like this one?
Sent please explain email to accountant. Looking for new accountant for next year.
You know, there are online services where you just type in the info from your forms, answer a few questions, and you’re done. They do all the math for you. I’ve been using them for, what, at least three years now. They’re great. I think I’ve been using the one at www.turbotax.com, which is free if you make less than a certain amount. IIRC, I heard that this year, the IRS is encouraging people to do their taxes this way by making the software much more available. I bet their website has more information.
The W-2 process is only an estimate and because the IRS doesn’t want to risk having people underpay, then not be able to afford the full amount come the end of the year, the W-2 over-withholds for most people.
I don’t use the box-checking method on the W-2. I just tell the payroll company how much tax I want deducted per month. Near the end of the year, I do a double check to make sure I’m not going to underpay by too much. If I am, I pay more in December.
For most people, using W-2s amounts to giving the government an interest-free loan.
By the way, the method proposed by the OP is very similar to that used in the UK. The Pay As You Earn process uses a more rigorous calculation and for most people the amount taken out of their wages is pretty much correct at the end of the year. You need a lot of other changes to make that work, though. For example, UK banks deduct tax from interest before you ever see it. Ditto for dividends. There is no tax relief on mortgage payments (it was being phased out - I think we are down to none. Even when there was tax relief, it was given at source) or most (all?) other loans.
For all of this “at source” stuff to work, it requires most people to be in the same tax bracket, or to have a standard tax deduction.
And in the UK you can ask the tax people to do the calculations for you.
Actually, replace all instances of “W-2” in all of the posts in this thread with “W-4.” W-4 is the form which sets the amount of withholding (filled out when starting a job). W-2 is the form for reporting wages & amount of tax withheld (received each year, around the end of January).
No wonder you folks are have trouble with your taxes.
I am going to assume that you are referring to the arcane nature of the bureaucratic nonsense that surround taxes, and not our intelligence. I also forgot to fill out my 27B-6 (see the movie Brazil) form. Is that so bad?
Dangerosa- I would recheck the calculations and/or seek the assistance of a professional. That sounds so out of whack that there must be a mistake somewhere.
In comparison, I’m single with no kids, claim every exemption that I’m entitled to, and typically have an underwithholding of just under $1k each year. This year I converted an IRA to a Roth IRA, so I owe quit a bit more than that, but not anywhere near $5k.
No, its right, but the 5k is combined federal and state. I used to be a tax professional. Its just way out of whack. Has to do with two good incomes (i.e. the marriage penalty), a very high combined income, almost no deductions, no qualification for the majority of credits - oh, and the little income other than salary - its a relative thing - I’m sure plenty of people would consider 4 figures worth of interest and dividends far from little. I could redo my withholding, but I could also just write the check.
I’m not REALLY complaining - you only have high tax bills if you make a lot of money and it doesn’t really seem right to complain about making a lot of money.