Hi,

I was under H-1B for the whole of 2005, and I have completed 1040-EZ. I took the standard $8200 deduction ($5000 plus $3200), and it turns out that I owe about $900. My company handled all the papers and forms for the H-1B in late 2004, and I am just concerned, since I am assuming that it is not normal to be owing so much in unpaid taxes. From my W-2, I have calculated that 13.5% of my wages (box 1) was taken as federal income tax (box 2). Is this less than normal? My wages are about $55,000.

From my W-2, I can see that my W-2 wages were calculated by:
(gross wage) - (health insurance costs) - (life insurance costs)
Should the gross wage include my annual bonus? If I got a raise in April 2005, should the gross wage be pro-rated to reflect the two different wages that I received for different parts of the year?

Thanks in advance for your help. I have been using this forum to complete my taxes for the last few years when I was under F-1. This is my first time completing my taxes under H-1B, but my case is very simple, as I am from South Korea and do not have any property or investments in the U.S. Thanks again.

vaya

I can't answer this question without seeing your complete return (there might be something else gone wrong) and your W2. I would advise seeking some professional help if you think you got your taxes wrong. But it might be as well that you just owe some income tax. It's not uncommon

But your bonus needs to be included in taxable income and your W2 does not have to do anything special about the raise.

Vaya

obelixs2

Thanks for the response. I think I may have just underpaid. I have a question regarding my paystubs. On the top, it says:

Status

FED: Single
ST1: Single

Exempt

FED: 03
ST1: 02

Does anyone know what the numbers for "exempt" mean? I am single with no dependents. I have a feeling that those 03 and 02 selections might be wrong, which is why I ended up underpaying. Thanks again.

AtlantaTaxExpert

ObelixS2:

Claiming "03" exemptions on your W-4 is the reason why you paid $900. The W-4 is filled out to tell your employer how much income tax to withhold from your pay.

BTW, you want to end up paying when you file your tax return, just as long as it is not more than $1,000.

The reason is simple: ANY refund is an interest-free loan to the government. It is better money management to keep your money as long as you can, then write a check and mail the return on 15 April of the following year.

obelixs2

Thanks Atlanta Tax Expert. Yes, it makes sense that owing money on your tax returns is better money management, although my case was unintentional. I am thinking of telling my employer about the issue and having my exemptions reduced, as I was very close to the $1000 this year and do not want to face penalties next year. Thanks again.

AtlantaTaxExpert

Good idea; go to "2" exemption for the federal W-4 and you will be okay.