Your Tax Question - 038

Dear John, This past year I found out the hard way that my employer was not keeping enough money out of my paycheck - it was ugly! I had to pay a lot of money, penalties, and something called the Estimated Tax every quarter this year. I have filled out a new W-4 with my employer but I am still not sure that there is enough being kept out of my weekly paychecks. Can you tell me how to check this? Thanks, Bunny.

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Hi Bunny,

Thanks for your question. The IRS has a calculator on its website that you may use to input your information to check your withholding status. Of course it is only a guide to help you avoid the dreaded Estimated Tax burden but it should get you pretty close. Use the link below and try it out - its FREE to use.

IRS Withholding Calculator

Best of luck,

John

PS. You are wise person to be checking this now rather than waiting until it is too late to make a difference - I commend you.

Your Tax Question - 029

Dear John, The last few years my wife and I have ended up owing taxes to MI, but this year since it's over $500 we're being penalized for it being late. Last year we paid over $500 and weren't penalized. is this was a new law this year. I'm rather ignorant about taxes and rely on TurboTax to help me out. Thx, Chuck
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Hi Chuck,

There are 10 civil and 4 criminal penalties imposed by MI but without seeing the forms and reasoning of your software program I am at a loss as to what your specific situation is. With that disclaimer I am willing to venture that the state acts like the federal in situations like this. When you owe Federal Taxes of over $1000 in a year you are required to pay Estimated Tax because simply put - the government will not wait for money. I am guessing that this is why you have been gigged for the $500 mark on your state taxes. Why this year and not last? I am not sure.

My best advice is to search your program's Help for the answer and you may even have to call the State Treasury Department. However, when it boils down to it, you may be further ahead to simply pay the fines than to hire a tax professional to solve this problem.

And oh yeah, consider fixing your W-4 with your HR department at work so that they can start taking more money out of your paycheck.

I hope this helps,
John

PS. I know a really good tax guy ;-) email me.

Your Tax Question - 001

Dear John, I was told that if I did not have enough taxes taken out of my wages through the year that I would have to pay a penalty – is this true? Alex.
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Hi Alex,

The government wants their money as you earn it so if you owe more that $1000 in taxes at the end of the year, Uncle Sam will consider it a loan to you and require that you pay the interest on that loan as well as a fee. I wonder who learned from who - the Credit Card company or the IRS? In any case, you will need to then estimate your taxes for the next tax year and begin making quarterly payments.

Best Wishes,
John

PS.There are ways to avoid the fees. If you need some help with this please email me and become 1 of my limited 30 clients for this upcoming tax season. Email me: dullc2005@gmail.com