Who feels they too much taxes?

[andyfvp]

Just did my taxes got a $5000+ bill! (my first time with US taxes) This really annoyed me and this was primarily due to claiming too many withholding allowances and having my spouse working as well. Live and learn I guess. However I added up all the taxes I pay and almost 46% of income is going in taxes as follows:

33% - Federal Tax
5% - State Tax
7% - SS Tax
1.5% - Medicare Tax

______
46.5%

This doesn't include sales tax on everyday purchases. Shame on those who say America is not a high taxing country!

Andy

[hermione]

Hmm... I've never heard people say America's not a high tax country. Our relatives in Taiwan always say we are a high tax country. But I don't know much about other countries.

As for the subject of paying too much, I totally agree. Every year, we work to save as much as we can, then come April (when we have to pay the 2nd installment of our property tax as well), we're cleaned out and have to start again. Of course, this is because we are self-employed and have to pay a lot of self-employment tax.

Do you do your own taxes, Andy?

[Kathryn]

Did you seriously do your taxes? Because if 33% of your income is going to fed income tax, you've missed something along the way. Assuming you have no other deductions, you should be paying 0% on the first $17,000 or so of your income, 10% on the next 15 grand, and so on. You don't hit the 33% tax rate until almost $200K in income, and even then, you're not paying it on all your income, only that portion of it over $200K (and in which case...cry me a river).

You should file a new W-4 with your employer and adjust your withholding allowances so you don't get hit again. Being off by 5 grand is pretty major.

[Milehimama]

I paid about $3700 on an AGI of $54,000, and got $9400 back total state and federal.

I don't think I pay too many taxes!

(Although in SC even food has sales tax. Some downtown restaurants have an effective tax rate of over 12% and I think that's too high.)

[andyfvp]

Hermoine - I used HR Block to do my taxes. I also tried it on turbo tax and the result was the same. As I have some foreign dividends I preferred to use professionals to avoid issues.

Kathryn - The reason I had the high tax bill was that I did set to many witholding allowances, and when my wife got a well paying job mid-year, I should have reset my withholdings. I also have some overseas income which I have to declare as well. So I am not saying my tax due was wrong, it was just a big hit for one payment. However, when I did work out all the taxes (federal, state, medicare, social) I pay it comes to about 45% of my income. I do get SS and Medicare back, but I will not see those payments for many years. My accountant told me, I should buy a house or have 3 more kids to reduce my taxable income! Also, I am no longer taking any more witholding exemptions.

Milehimama - Good for you. When I say taxes, I mean all the expenses uncle sam takes - including SS, Medicare etc. Your tax rate seems really low (7%) - you must have a number of itemised deductions.

[GOTO Fashion]

Mortgage interest is a major deduction, and it often means the difference between paying the IRS more taxes or getting a refund. As for the kids, I'm not sure having 3 kids for the deductions would really offset the added expense

Recently, I considered the cost of employment and income taxes (about 25%) and childcare (another 25%) on my gross pay and was shocked to see that we only really got to keep about 50% of it. If I took a lower-paying job for lifestyle reasons, the cost would jump to 58 to 65%. Fortunately, my husband's income tackles the lion's share of our expenses, and my income basically provides us with entertainment, savings, and creature comforts. You still have to wonder if it even makes sense to work though...

[Lynnae]

We owe $5700 this year, due to some bad advice from an accountant. That's not the norm for us though.

Basically we received an inheritance in the form of an annuity. The accountant told us we'd only owe taxes on the interest the annuity had earned, which wasn't that much. Unfortunately, the money that funded the annuity was rolled over from a pre-tax retirement plan, so we owe taxes on the entire amount. Not fun.

[yourbeginnings]

I think any amount of taxes is too much in taxes. On the other hand, I do enjoy and what my taxes provides: roads to drive on, protection, national museums, etc. Rather than a wage tax, I would definately prefer a national sales tax or a flat tax rate.

[lucille]

Generally our base taxes taken out of payroll has been ok. It has been those windfalls of income from non payroll sources that absolutely kill us.

I think what happens with the tax code is that if you make insane amounts of money you already pay less tax on it combined with more ability to implement tax avoidance strategies. IE: it is easier to set up a family trust or something like that to avoid taxes if your filthy rich rather than moderately rich or came into a windfall of money.

So those who are doing pretty good or doing pretty good and have some investment income or some other non-payroll income absolutely get nailed.

The IRS tried to charge me $15,000 on a $28,000 insurance settlement a few years ago. It fell into one of those oddities in the tax code that declared it wage income but none of the IRS documentation states this anywhere. They missed that we declared it elsewhere, fined us, charged us tax, penalties, interest etc. We had to hire a lawyer to fix the mess and he got the amount down to about $3600 but still. None of this would have even happened had we been able to get a straight answer out of the IRS in the first place.

As far as high taxes. Our federal is usually OK but we have a few good deductions we can take most years. Our state property and sales taxes are killing us. We don't have a state income tax but all of our other taxes and fees are sky high and we get little in return.

[amyschiff]

The withholding allowances can really make the difference in what you get/owe at the end of the year. I file Single 0 which makes it so they deduct more throughout the year, but then I get a nice refund back.... like a forced savings except that the government gets to earn the interest on your money =(

The more allowances, the higher each paycheck is. But then you will likely end up owing a lot.

For me, it makes more sense to get used to a lower monthly income and then have a nice refund at the end of the year.