For the 2nd year in a row we have been hit HARD and owe multiple thousands of dollars in taxes. We had followed the advice of our tax preparer last year and had the max deductions taken out, but apparently it was not enough. Is there a calculation I can do to determine what additional amount we should have taken out per pay so we don't end up in this mess for a 3rd year in a row?

This is confusing to me. If you are claiming 0 exemptions on your W4s and you still have to pay a lot, then you must have a lot of income that was not subject to withholding. Or maybe you need a new preparer. Are you filing a standard form or are you itemizing deductions?

When you say you had "the max deductions taken out," do you mean that you submitted a W-4 to your employer with 0 allowances? If so, then you must have significant income from other sources such as dividend, interest, and capital gains. To be safe, you can calculate an additional amount of tax to pre-pay via estimated tax filings as follows: starting with your 2007 total tax bill, subtract out the withholding that you expect your employer to take out over the course of the year, and the remainder is your anticipated tax bill for April 2009. Divide that number by 4, and file estmated tax payments for that amount in April, June, September, and January.

This is confusing to me. If you are claiming 0 exemptions on your W4s and you still have to pay a lot, then you must have a lot of income that was not subject to withholding. Or maybe you need a new preparer. Are you filing a standard form or are you itemizing deductions?
The past 2 years we have gone to a tax preparer (prefer not to mention the company as it is widely known). Our income is above the 156k so I've been told that we are not eligible for too many deductions. Last year I had lost my job and started a new, as did my husband. Neither of us were eligible for 401k or retirement plans through our companies so no $ was invested. If I would have know this, I probably would have opened the college fund accounts for my kids to have SOMETHING to show for the past year. Any suggestions you have are very welcome.

When you say you had "the max deductions taken out," do you mean that you submitted a W-4 to your employer with 0 allowances? If so, then you must have significant income from other sources such as dividend, interest, and capital gains. To be safe, you can calculate an additional amount of tax to pre-pay via estimated tax filings as follows: starting with your 2007 total tax bill, subtract out the withholding that you expect your employer to take out over the course of the year, and the remainder is your anticipated tax bill for April 2009. Divide that number by 4, and file estmated tax payments for that amount in April, June, September, and January.
Nope, no dividends (actually took a loss), minimal interest and capital gains. And we both claimed 0 exemptions on our w-4s. Now when you say start with my 2007 total tax bill, is that the amount we owe for this year?

ebaines and have the same thoughts. If the bulk of your income is from salaries and you elected 0 allowances on your W4 then, even if you filed a standard form without itemizing you shouldn't have had to pay thousands.

You really didn't answer our questions. I'm not sure where the $156K figure comes in. Are you saying you are subject to AMT? Do you own a home?

If you were not using H&R Block, then I would suggest taking advantage of their $29 Review offer. For t5hat amount they will review last years form. But I really think something is off here.

ebaines and have the same thoughts. If the bulk of your income is from salaries and you elected 0 allowances on your W4 then, even if you filed a standard form without itemizing you shouldn't have had to pay thousands.

You really didn't answer our questions. I'm not sure where the $156K figure comes in. Are you saying you are subject to AMT? Do you own a home?

If you were not using H&R Block, then I would suggest taking advantage of their $29 Review offer. For t5hat amount they will review last years form. But I really think something is off here.
Sorry if I'm a little confusing here. I'll try to explain a little better. The 156k is the amount a joint filing can make before deductions are taken away. For example, out of the 15k I paid in childcare I was only able to claim 3k. So, although I had deductions over 18k I was only able to claim 10. We do not own a home due to a Ch13 we are due to come out of in 11 months. And we have used H&R the past two years, which is the only time we have ever owed $. Is there a date that I can still open a college fund that I can have added to the 2007 taxes or is it too late to try any of that stuff now? Again, I'm open to anything.

Nope, no dividends (actually took a loss), minimal interest and capital gains. Now when you say start with my 2007 total tax bill, is that the amount we owe for this year?

Yes - start wiith the total tax as shown on line 46 of your 1040 for 2007.

I would guess that you are probably getting hit hard by the AMT - it causes you to lose some of your deductions for things like real estate taxes. Look at line 45 of your 1040 - does it show AMT tax?

Finally - you didn't answer how many allowances you and your husband have listed on your W-4s. When you have 2 incomes you are instructed to reduce the number of allowances from what you might otherwise be entitled to, since your actual tax bracket based on your combined salaries is higher than if only one of you was working. At your income bracket each allowance means a reduction of about 25% x $3,500 = $875 withheld over the course of the year. So if you each claimed, say, 1 allowance instead of 4 that would cause an additional $2,625 to be withheld. Hope this helps.

I think you need a new preparer. As far as I know the only limitations on itemized deuctions is that certain categories (like medical) have to exceed 2% of your gross to be deductible. But you are missing the point here.

If your income is almost all from salaries (as it appears) and you have taken 0 allowances on your W4, then if you filed a standard 1040 form, taking the standard deduction, then your tax liability should be very minimal. If you are able to itemize at all, then you should get a refund, even if it's a minimal one.

For you to still owe thousands, does not sound right to me and I urge you to have someone else look at your returns. You may even be able to use one of the free online services to just do a comparison.

As to the College funds, I think you may have until April 15 to make your contribution.

I think you need a new preparer. As far as I know the only limitations on itemized deuctions is that certain categories (like medical) have to exceed 2% of your gross to be deductible. But you are missing the point here.

If your income is almost all from salaries (as it appears) and you have taken 0 allowances on your W4, then if you filed a standard 1040 form, taking the standard deduction, then your tax liability should be very minimal. If you are able to itemize at all, then you should get a refund, even if its a minimal one.

For you to still owe thousands, does not sound right to me and I urge you to have someone else look at your returns. You may even be able to use one of the free online services to just do a comparison.

As to the College funds, I think you may have til April 15 to make your contribution.
I think this is what I cannot get past. If I took the max, then how can I possibly owe this much. I think I am going to take your advice and try the online tools tonight to see if it comes up with the same thing. Thanks for the advice. I'm glad I'm not going crazy in my thinking of how it this worked out.

One of the problems here, molly, is you aren't answering our questions fully. You keep saying "if I took the max". But you haven't answered our questions trying to confirm whether you did or not. To have the maximum withholding taken from your pay, you would have to claim 0 exemptions on your W4. Yes or no, did you both do that?

If you did, then it makes no sense that you would have to pay.

One of the problems here, molly, is you aren't answering our questions fully. You keep saying "if I took the max". But you haven't answered our questions trying to confirm whether you did or not. To have the maximum withholding taken from your pay, you would have to claim 0 exemptions on your W4. yes or no, did you both do that?

If you did, then it makes no sense that you would have to pay.
Yes. For both my husband and I both completed new w-4 s at the beginning of the year to ensure that we were both filing 0 exemptions.

Yes. For both my husband and I both completed new w-4 s at the beginning of the year to ensure that we were both filing 0 exemptions.
The beginning of 2007 that is.

Ok. Then something appears to be wrong and I would definitely get someone else to look at your return. Also you didn't answer ebaines question about AMT.