Help me understand taxes

Discussion in 'Archived Threads 2001-2004' started by Yoshi Sugawara, Jan 31, 2002.

  1. Yoshi Sugawara

    Yoshi Sugawara Stunt Coordinator

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    I just got my W-2 form in the mail and decided to see how much of a tax return I'd get this year (using the 1040EZ) - and found out I owe nearly $1000 !

    Nearly 1/4 of my pay went to taxes, yet I still owe more? Why? Is it the income bracket I'm in that determines this?

    I felt like I already paid enough taxes..ugh
     
  2. Kenneth

    Kenneth Supporting Actor

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    Tax brackets in the US are tiered and a function of income. In a certain income range you pay X%. If your income moves into a higher or lower range then the % will go up or down, accordingly.

    How much they take out is based on your base income and your withholdings that you put on your W4. If you don't have any special deductions (like home interest or kids) you should only take a withholding for yourself and one extra. Sometimes you can go with one or zero withholdings if your taxes are always under. If you have bonuses or stock or other income that counts against your W2 but is not part of your base salary then that can shift you into a higher bracket which would make your withholdings too low.

    Hope that makes sense.

    Kenneth
     
  3. Anthony_J

    Anthony_J Stunt Coordinator

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    The taxes you owe depend on your income level, filing status, possible deductions, and the various sources of income you had during the year.

    If you owe taxes, that means that you didn't have enough tax withheld from your income during the year (if you're an employee), you own your own business and didn't pay the required tax amounts based on your 2000 income and SE tax amounts, or you had income outside of your normal wages.

    I'll assume you're an employee, because business owners usually know tax situations, or pay accountants to do that stuff for them.

    First and most important is probably the number of dependents you claim on your W4. This dictates the amount of tax that is withheld from your pay. Basically, the lower the number of dependents you claim, the higher the amount of taxes gets withheld from your pay during the year.

    Generally, if you're single, you'll claim zero or one dependent. Some people feel that claiming zero is like giving the government an interest free loan for a year, but I like having too much taken out during the year, because I like getting a big refund in April, and I know that I would spend the money on stupid stuff if I were to get it with my pay.

    If you're currently claiming the correct number of dependents on your W-4, then you either calculated your tax wrong, or you had income outside of your normal salary.

    Remember that anytime you sell stock at a gain, or win the lottery, or win on a gameshow, or get any income besides wages, that income is subject to tax. You have to pay tax out of your pocket on that extra income (things like gains on stock sales can be taxed as high as 50%) because there's nobody that will withold the tax for you.

    If you had no other income besides normal employment wages, and you had the proper amount of tax withheld during the year (per your W-4 filing status), then there's a 95% chance that you calculated wrong. Check your math, check to make sure your taking the proper standard deduction (or itemizing correctly), and double check the tax per the tax tables.

    Let me know if this helps, if you give more specifics as to your situation, I might be able to provide a more detailed explanation.
     
  4. Henry Carmona

    Henry Carmona Screenwriter

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    Could some one plz explain how this "marriage penalty" tax thing works and arent they going to do away with it?
    My wife didnt see 1/3 of her paycheck last year.
    Uncle Same took out $24k, yes $24k in taxes!!
    We made some changes and i hope it looks better this year.
     
  5. SteveA

    SteveA Supporting Actor

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    The reason people say there is a "marraige penalty" is because the standard deduction for married folks is less than twice that for single. Single people can claim a standard deduction of $4550, but for married couples it is only $7600 (or $3800 apiece if filing separately).
     
  6. Yoshi Sugawara

    Yoshi Sugawara Stunt Coordinator

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    Wow, thanks for the replies.

    Anthony:

    I am single and have no dependents, and I had no other income besides interest from a CD account (which wasn't that much) I made a little over $50k last year. I'm pretty sure I had just 1 withholding on my W-4.

    I used TurboTax on the web - maybe they calculated wrong? Or should I have my employer withold more? Hrmph...
     
  7. Jamie E

    Jamie E Stunt Coordinator

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  8. Thomas Newton

    Thomas Newton Screenwriter

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  9. Vince Maskeeper

    Vince Maskeeper Producer

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    Well, making $75,000 a year will probably put you into the topic tax bracket [​IMG]
    -Vince
     
  10. Scott Merryfield

    Scott Merryfield Executive Producer

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    To all of you folks who think getting a big refund back in April is a good plan, I have a proposition. If you normally get back a $1,200 refund, adjust your withholdings so you will break even on your taxes, and send me $100 per month. I will gladly pay you back $1,200 the following April. You'll still get your non-interest earning saving plan, but the check will just come from me instead of Uncle Sam.
    If enough people would do this, I could retire on the interest income alone. [​IMG]
     
  11. BrianB

    BrianB Producer

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  12. Vince Maskeeper

    Vince Maskeeper Producer

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  13. andrew markworthy

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    If it's any consolation, guys, just be grateful you don't live in the UK. Ridiculously lenient corporate taxation, but a personal taxation system seemingly based on puritanical envy of the middle classes, but slavish worship of the filthy rich.
     
  14. BrianB

    BrianB Producer

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    Thanks for the good advice, Vince.

    And Andrew, I know exactly what you're talking about unfortunately.
     
  15. Ken_McAlinden

    Ken_McAlinden Producer
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    Sort of a sidetrack, but Andrew's post got me thinking. How are taxes assessed in Britain w.r.t. legislation? In the USA, legislation related to revenue must originate in the House of Representatives (where representation is proportional to population) but must ultimately also be approved by the Senate (two senators per state - the closest thing we have to "lords" [​IMG]).
    Regards,
     
  16. Anthony_J

    Anthony_J Stunt Coordinator

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  17. Anthony_J

    Anthony_J Stunt Coordinator

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  18. Ken_McAlinden

    Ken_McAlinden Producer
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  19. Brian Perry

    Brian Perry Cinematographer

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    Andrew,

    I'm curious as to what the top tax rate in England is. Here it is 39.6% (plus state taxes, plus Social Security, plus Medicare, plus property taxes, plus sales taxes, etc.) I can't imagine it's much worse anywhere else (overall, when all the various taxes are combined).
     
  20. andrew markworthy

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    Ken, British taxation system in a nutshell:

    (a) income tax works pretty much like the American system - you can earn so much income tax-free (if memeory serves correctly, about 6k), and thereafter the tax rate increases in bands. The top rate is 40 per cent, which kicks in at about 27k p.a. (only your income above the threshold is taxed at 40 per cent, but all of your savings are taxed at this rate, no matter if your salary is only 1 penny into the top tax bracket; thus you've got either to earn masses more than the threshold or stay below it if you've got substantial savings). The rates and bands are fixed by the Chancellor of the Exchequer (i.e. the minister in charge of finance). Almost always any changes are made in the annual Budget, held in April. The main rates have been unchanged for a good few years, but typically the threshold for entering the next band is raised by a few hundred pounds each year. Anyway, at the Budget, the Chancellor announces the changes, which are then debated by the House of Commons before (almost inveitably) being passed unaltered. They are then sent to the House of Lords, in essence for rubber stamping. In addition to income tax, there is also National Insurance, which basically pays for the state pension, health care, etc. This again is in bands. Why National Insurance can't be swallowed up into income tax baffles most people (myself included).

    (b) indirect taxes are also altered at the Budget. The main one of these is VAT (value added tax) which is added to most goods barring essentials, such as basic foodstuffs, etc. In addition, there are duties on petrol and alcohol (both unbelievably massive compared with the USA), an annual car tax, etc. There are also some ancient oddities, like stamp duty (paid on some legal documents, such as house deeds), which in any rational society would be scrapped.

    (c) there are also local taxes. These are fixed by the local governments (akin to state taxes), but there is legislation which prevents massive increases in these (this was brought in after some far left councils increased local taxes to ridiculous levels).

    However, all taxes ultimately have to be formally approved by the government. We've been quite fussy about this sort of thing since King Charles got it into his head that he could raise taxes without getting the approval of the people.
     

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