Taxes and 2nd jobs

[stigrl]

Hi, I am new here.

I am married and my husband hasn't been working since early this year (please don't ask because I really don't want to get into it).

In the past, I have always claimed S0 even while married so I know I don't owe anything and usually get a nice sized return. But this year with my husband not working I have been claiming M3 (on 650/week) so I am able to pay all the bills. I also have aquired a 2nd job to give us some food and gas money- I have been claiming M0 on that since February, anywhere from $50-150 per week.

I am scared to death we will owe a lot for taxes this year. Is there anyway our combined income (less than usual because of my husband not working) will put us in a lower tax bracket or something so the extra exemptions won't matter??? Will my 2nd job mess that up somehow? Plus the government is taking LESS out of our checks this year so does that mean I'll owe even MORE??? I want to change my exemptions to S0 for the rest of the year to try to balance it out but honestly don't think I can swing that and still pay for the bills.

Any input would be very helpful, I am not knowledgeable about this subject!

[TheStreetCeo]

You should consult your tax advisor. That person can determine if you need to increase or decrease your exemptions based on your current income. I would recommend you do that right away as half the year is over and if you're tracking a tax payment at the end of the year, you'll need as much time as you can to correct it.
BTW, you should not get a large tax return each year. It's not doing you any good. You're better off getting that money each pay period and sticking it into an interest bearing account, instead of allowing the government to hold for a year so they can earn the interest.

[jIM_Ohio]

run turbo tax on current pay stubs and see what gives.
then project out the remainder of the year and plug into turbo tax again

if the second job has only been for last few months, the second technique will tell you more than the first.

If the first gives a large refund (meaning ytd gives high refund) and projection has you owe, you need to make sure the second job holds more taxes out.

[jpg7n16]

I also have aquired a 2nd job to give us some food and gas money

I sense someone with her priorities out of whack. Food and water are priority #1 (neccessities). If you had to take on a 2nd job, becuase you're paying other things before you pay for essential food - your priorities are out of whack.

I also suspect that you have large other expenses, so any tax burden is only a sign of a deeper problem with your budget.


You've got several people on here that come to help, so if you'd like to post the rest of your budget, we'd love to give you some pointers.

How much will you make total for the year? Do you have any kids? (I can give you a quick estimate of the total taxes you'll have to pay for the year)

[stigrl]

Thanks for the replies.

Yes, I agree my/our priorities were out of whack for about 5 years- while my husband did the bills, and it's my own fault for not knowing more what was going on with us financially. Two years ago we did a debt consolidation (which I totally regret) and closed all our credit cards and have not used credit since. This past April I started taking control of our finances since I was the only one making money and I have been paying everything on time plus a little extra. In the past 7 months, we have cancelled cable, my husband cancelled his cell and just has a $25 home phone, we rarely spend money on entertainment/dining out/clothing. And whenever we do it's dollar nights somewhere or clothing at a thrift store. We even sold our 2nd car (problem is we sold it to my father in law and have yet to pay off the balance and transfer the title!!!) We have been trying REALLY hard to curb our spending and I think we have done a great job. Of course, you can always do better and I'm welcome to suggestions.

Our budget:
Mortgage 850
Car #1 400 (19,000 balance and upside down on loan- 5 year pay off)
car #2 200 (paid down- next payment due in Jan. with 4,000 balance)
Electric/Gas 200-250 average
Cell- 70 (Could cut 20-30 I suppose without a data package...)
Insurance- Home/Cars- 230
Debt Consolidation- 400 (7600 balance or 2 years)
Misc. bills garbage/water/sewer etc averages 50 / month
Phone Bill- home 25

I also just pre-payed our property taxes so our mortage is down to 700/month for the rest of the year. (We don't have an escro account) My goal is to pay the car #2 off by the end of the year, then start working on the debt consolidation. I am planning on doing that with any extra money I get or any money my husband brings in (he is trying to start his own business, whole different story!). But as you can see I'm barely making it with my salary hence the higher exemptions.... oh by the way, no kids, and about 35,000 a year.

The reason why I said "2nd job for food and gas" is because in my system, I use my 2nd job check as spending money- cash in my wallet and when it's gone it's gone. My checking account is for bills ONLY. Just makes things easier for me to keep track of.

So any suggestions would be great, although I "think" I've been doing a good job I just need to suck it up and keep working hard for the next couple years.

[jpg7n16]

Thanks for the replies.

Yes, I agree my/our priorities were out of whack for about 5 years

Well, no worries and no blame game goin on here - we'll just get you back on track!

Two years ago we did a debt consolidation (which I totally regret) and closed all our credit cards and have not used credit since. This past April I started taking control of our finances since I was the only one making money and I have been paying everything on time plus a little extra. In the past 7 months, we have cancelled cable, my husband cancelled his cell and just has a $25 home phone, we rarely spend money on entertainment/dining out/clothing. And whenever we do it's dollar nights somewhere or clothing at a thrift store. We even sold our 2nd car (problem is we sold it to my father in law and have yet to pay off the balance and transfer the title!!!) We have been trying REALLY hard to curb our spending and I think we have done a great job. Of course, you can always do better and I'm welcome to suggestions.

Well it looks like you're making some good changes to get you there. I'd start evaluating your budget from the big numbers down to the small. Ask yourself, can this get lower? If yes, great. If no, okay move to the next item.

Our budget:
Mortgage 850
Debt Consolidation- 400 (7600 balance or 2 years)
Car #1 400 (19,000 balance and upside down on loan- 5 year pay off)
Insurance- Home/Cars- 230
Electric/Gas 200-250 average
car #2 200 (paid down- next payment due in Jan. with 4,000 balance)
Cell- 70 (Could cut 20-30 I suppose without a data package...)
Misc. bills garbage/water/sewer etc averages 50 / month
Phone Bill- home 25

I rearranged it largest to smallest for purposes of what you should focus on lowering, but I must point out - do you not pay for food? Where is food in your budget?

It's pretty clear that your largest expenses are all debt related - 2 cars, mortgage, debt consolidation. So it's good that you're focusing on getting these out of your life. Any chance of selling the Car#1 and getting a loan for the difference and a much cheaper car?

Ask some creative questions, like "could we move to a cheaper place?" (not likely); "if we sold the house, could we pay off one/more of these other debts, and still find somewhere good to live?"; "if we paid down the largest debt car so we're not upsdie down anymore, could we find a willing buyer and downgrade in car to save a couple hundred a month?"

Things like that.

But try to eliminate the big expenses first. Don't start out trying to change the small ones.

I also just pre-payed our property taxes so our mortage is down to 700/month for the rest of the year. (We don't have an escro account) My goal is to pay the car #2 off by the end of the year, then start working on the debt consolidation. I am planning on doing that with any extra money I get or any money my husband brings in (he is trying to start his own business, whole different story!). But as you can see I'm barely making it with my salary hence the higher exemptions.... oh by the way, no kids, and about 35,000 a year.

Is that $35k total for both jobs? If so...

If you take the standard deduction (which you likely should) your entire tax liability for the year would be around $1,630. Depending on how much has been taken out of your checks so far, that will tell you about what you need to save to finish out the year taxwise.

And I don't like the decision to prepay the taxes as much. Maybe should have set aside that 150/month into an account and paid extra on the car loan? But I don't know if you can undo that or not. Likely not.

The reason why I said "2nd job for food and gas" is because in my system, I use my 2nd job check as spending money- cash in my wallet and when it's gone it's gone. My checking account is for bills ONLY. Just makes things easier for me to keep track of.

See from what you said, how I took it was that you would make sure all your debts were paid, make sure your escrow account was good, pay extra on the car - and then if there was money left over, you'd budget for food. It shouldn't be that way.

Plan out an amount for food 1st - before any of your debts gets a dime - and set that aside in cash is fine. Then the rest of your money can go towards eliminating debt and whatnot.

So any suggestions would be great, although I "think" I've been doing a good job I just need to suck it up and keep working hard for the next couple years.

Well yeah you've made some good changes so far. Even sold a car! Good work

If you're that determined, you'll be out of these debts in no time.

[jpg7n16]

I'd also throw up a red flag for you that it sounds like you're developing some resentment towards your husband. As yes another income would definitely help your situation.

You might want to get some marriage counseling, if the resentment keeps up or continues to grow..

[investingnoob]

I got a part time job on top of my full time. I ended up owing like $1000 at tax time. I wouldve gotten $200 back if I had just worked my full time job. It wasn't even worth working the 2nd job... of course I had nothing to claim, no house, or nothing.

By the way, I presume STIgirl means you got an STI+girl= HOT??? =)

[stigrl]

Thanks for the replies. Ha, no STI.

That is what I'm worried about owing a ton of money just because I have a second job..... but I'm hoping because my husband won't be claiming much income it won't be so bad?? And yeah I know a little resentment has been built up, we do talk about it a lot and working through it, thanks for the concern

What does entire tax liability for the year of 1,630 mean? Of 35,000 that's like 4%? And my second job may be another 5,000 or so.

I have asked the bank about getting a difference for what we owe on our car over what it's worth. They need us to have more liquid assets to back up the loan. Do you think I should talk to a dealership about this instead of a bank? I would definetly do that I just thought it wasn't an option.

Thanks!

[stigrl]

Thanks for the replies. Ha, no STI it's just a play on my last name.

That is what I'm worried about owing a ton of money just because I have a second job..... but I'm hoping because my husband won't be claiming much income it won't be so bad?? And yeah I know a little resentment has been built up, we do talk about it a lot and working through it, thanks for the concern

What does entire tax liability for the year of 1,630 mean? Of 35,000 that's like 4%? And my second job may be another 5,000 or so.

I have asked the bank about getting a difference for what we owe on our car over what it's worth. They need us to have more liquid assets to back up the loan. Do you think I should talk to a dealership about this instead of a bank? I would definetly do that I just thought it wasn't an option.

Thanks!

[jIM_Ohio]

Thanks for the replies. Ha, no STI.

That is what I'm worried about owing a ton of money just because I have a second job..... but I'm hoping because my husband won't be claiming much income it won't be so bad?? And yeah I know a little resentment has been built up, we do talk about it a lot and working through it, thanks for the concern

What does entire tax liability for the year of 1,630 mean? Of 35,000 that's like 4%? And my second job may be another 5,000 or so.

I have asked the bank about getting a difference for what we owe on our car over what it's worth. They need us to have more liquid assets to back up the loan. Do you think I should talk to a dealership about this instead of a bank? I would definetly do that I just thought it wasn't an option.

Thanks!

Filing taxes at end of year is a way of reconciling your whole year with the IRS.

Your tax liability is calculated at the end, not at beginning.

Meaning add up all income
take out all adjustments
take out all deductions
calculate taxable income
calculate tax
compare to withholdings
factor in credits
then refund or owe government

so add in all income before you focus on job 1 having a liability of $1650 or job 2 needing X withheld- the government will calculate it in above order (its the same order of the 1040 forms).

[jpg7n16]

What does entire tax liability for the year of 1,630 mean? Of 35,000 that's like 4%? And my second job may be another 5,000 or so.

Exactly. The tax rates aren't flat across your whole income. They are marginal rates after all deductions have been accounted for. If you make... well I'll use $40,000 now. So the tax liablity will be a bit higher this time.

So 1st add up all your income for the year: 35 + 5 + whatever hubby made

From there, I used $0 above the line deductions (like 401k contributions, student loan interest, etc.), and used the basic standard deduction and personal exemptions for a married filing joint couple with no kids. Just to get an estimate. The more deductions you have, the lower it will go, but without any more income, it can't go higher.


So your $40k - 11,400 (Standard Deduction for Married Filing Joint) - 3650*2 (personal exemptions) = $21,300 taxable income.

Using the 2010 tax tables, I calculated your estimated total tax liability for 2011 (2010 Tax Rate Schedules: Marginal Ordinary Income Tax Brackets for Year 2010)

Of the 21,300, the 1st $16,750 is taxed @ 10%, and the rest for you will be at 15%

$16,750*10% + (21,300-16,750)*15% = $2,357.50


What that means is that total for the year, you owe $2,357.50. But you've been having taxes taken out of your paychecks along the way (hopefully) so you can check on your paystubs just how much has been paid in so far. Then you'd need to make up the rest somehow.

(For 35k, it worked out that your taxable income was $16,300 which is all in the 10% bracket which 16,300*10% = 1,630)

I have asked the bank about getting a difference for what we owe on our car over what it's worth. They need us to have more liquid assets to back up the loan. Do you think I should talk to a dealership about this instead of a bank? I would definetly do that I just thought it wasn't an option.

Thanks!

Gotta love those banks right? "In order for us to lend you this money, please show us why you don't need it" If you had the liquid assets, you wouldn't need to borrow the money! Stupid banks.

I don't know if a dealership would be any fairer. They'd probably try and offer you deals to get you to move UP in car - which would be the worst thing for you to do. And/or charge some ridiculous interest rate in order to roll in the old loan.

But that's a good idea You're thinking up ways to lower the overall debt owed, so keep it up!

[stigrl]

That really REALLY helped, thanks.
Yeah.... that's what happened to our last car purchase, got talked into a newer/higher priced car with our old debt rolled into it at 10%. YUCK. But it is a way better quality car and $50 less payment than our previous one, so at least there was a little positive. I've thought about refinancing now that our credit is better but probably will just pay it down to what it's worth and go from there!

[jpg7n16]

That really REALLY helped, thanks.

Glad to help

Yeah.... that's what happened to our last car purchase, got talked into a newer/higher priced car with our old debt rolled into it at 10%. YUCK. But it is a way better quality car and $50 less payment than our previous one, so at least there was a little positive. I've thought about refinancing now that our credit is better but probably will just pay it down to what it's worth and go from there!

Nothin says you can't do both! If you can't get rid of the whole debt, lowering the interest rate is the next best thing. (Like: Refi down to 6 or 7% and start paying it down to what you owe)

[cptacek]

We even sold our 2nd car (problem is we sold it to my father in law and have yet to pay off the balance and transfer the title!!!)

Our budget:
car #2 200 (paid down- next payment due in Jan. with 4,000 balance)

This doesn't make sense to me. Did you sell the car, or is the father in law just borrowing it? (If he didn't pay you and you didn't transfer the title, he is borrowing it. If he paid you and you used the money for something else, you are selling it, and once you transfer the title it is sold.)

If he is borrowing it, it needs to get sold. Either to him or someone else.