Hellobee Boards

wow. The only thing I can think of did that little bit of raise put you into a different tax bracket?

@kjpugs: Ugh, so annoying. I'm sorry! Could you use the money to fix the AC instead of buying a new car? I'm not sure how much that stuff costs.

There is one upside to us being so broke... we get a good portion of what we paid in taxes back in our return.

Oh, that's awful - I know we count on tax money to put into savings, fix up the house, etc. Sorry it wasn't what you hoped!

I am interested to see how much we get this year... Since we got married & bought a house.

That's obnoxious, I'm so sorry. We count on that money, too, and it's hard not to have it.

@kjpugs: I found this on the IRS website. According to this, employee covered health insurance is reported but not taxed. Reporting Employer Provided Health Coverage in Form W-2

The Affordable Care Act requires employers to report the cost of coverage under an employer-sponsored group health plan on an employee’s Form W-2, Wage and Tax Statement, in Box 12, using Code DD. Many employers are eligible for transition relief for tax-year 2012 and beyond, until the IRS issues final guidance for this reporting requirement.

The amount reported does not affect tax liability, as the value of the employer excludible contribution to health coverage continues to be excludible from an employee's income, and it is not taxable. This reporting is for informational purposes only, to show employees the value of their health care benefits.

More information about the reporting can be found on Form W-2 Reporting of Employer-Sponsored Health Coverage.

@littlek: Can you point me to these? I wasn't aware and would like to educate myself. Thanks!

@kjpugs: I haven't finished our taxes yet (we are waiting on DH's W-2). But so far I'm actually seeing that we are getting back a bit more than I expected. I had a distribution from my 401K that I knew we were going to be taxed on (no penalty- not a distribution of choice) and that was our only change for the year. I would have expected that your return would have gone up since you have an additional dependent to claim.

@littlek: Thank you, I knew about medicare but didn't make the connection to ACA.

@kjpugs: also keep in mind though that unless going into a new tax bracket puts you into a new category for some deduction purposes a new tax bracket isn't quite as big a deal as it seems. Like for example, if you made jointly $223,000 in 2012 and $224,000 in 2013, that does NOT mean that you're paying 33% of 224 vs. 28% of 223. I'm sorry if this is something you already know but maybe someone on here does not so I'll explain anyways. Everyone pays the same % of taxes on the same amount of money. So we ALL pay 10% of the first $17,800 we make, and then we ALL pay on the next approx 55k we make and then we ALL pay 25% on th next approx 75k we make. When you go into a new tax bracket, you only pay that higher amount on the amount of money you make over the minimum for that bracket. The big difference is that if you make a lot of money you might not be eligible for the same deductions that other people are eligible for at lower brackets.

@kjpugs: yea it is just too confusing. I understand the basics of it but when it gets to the specifics about deductions I get so confused. We do pay our accountant sort of a lot of money, but I feel like she probably saves us more than she costs us because I'm sure I'd mess it up. (In fact, the first year I tried to do my own taxes after I started working I spent about 40 hrs trying and DID end up messing it up and the accountant had to go back and fix it for me the next year lol).

I'm interested to see where we'll be at bc our situation changed a ton last year (DH in school 10/12 months, my maternity leave an then me going out on my own business, etc). We usually aim to be even so we didn't give the govt money that's ours and so we don't owe! We put money in our IRA, etc to get us there!

@kjpugs: Oh, I thought having a kid gets you more of a refund. Good to know. Need to remind myself when I get pregnant.

@kjpugs: Another thing to keep in mind with the brackets is that your payroll department taxes your paycheck based on the bracket your salary is in. BUT it's possible that DH is in another bracket OR that your salaries combined puts you in another bracket. If that's the case, the lower salaried person likely isn't having enough taxes taken out. It's called the "marriage penalty." DH and I have owed a lot each of the past two years (both since marrying) and had to drop our withholdings to single to have more taken out of each paycheck. Does that make sense?

To use generic numbers, let's say you make $50,000 and DH makes $90,000. The tax rate would vary based on how you file/select your withholdings. If you file/withhold as single on a $50,000 salary, your tax rate would be 15%. BUT, if you file/withhold as married (joint or separately), your tax rate would be 15%. Likewise, if you file/withhold as single on a $90,000 salary, your tax rate would be 28% but as married-joint it would be 25% and married-separately would be 28%. NOW, if you file as married-joint, your combined income in this example would be $140,000 and the tax rate is 25%. In that case, the person earning $40,000 would be taxed at 15% and end up having too little withheld when filing married-joint. If the $90,000 salary got a $10,000 raise and the joint income was $150,000, for filing purposes, as married-joint the tax rate would be 28% then and BOTH parties have too little withheld (one at 15% and the other at 25%). In that case, you usually end up owing which is why people ask to have more withheld from their paychecks.

Sorry, that was a lot! Clearly I know way more about this than I should... =/ (I need a smiley for this one!!)

@LindsayInNY: I wish our accountant had explained this half as well as you did...

@LindsayInNY: +1!! Lots of smiley faces for you!

@LindsayInNY: thank you for this post! I've always felt semi knowledgable about our taxes, but reading this made things a lot clearer for me! My husband and I also had to drop our withholdings to single after our first year of filing together. I'm hoping we fare better this year. I don't ever expect a big return, I just don't like having to pay in!