Why do I owe both Federal and State taxes every year even after I dropped my exemptions and I make the same amount of money?
Your withholding is based on how you file W-4 form.
If you are single, do not have any dependents, standard deduction, no additional credits or deduction - generally - you should file as Single with two allowances.
If you provide your gross income - I will help estimate your tax liability and withholding.
2006 - Gross Income $16,333; I owed Federal $57, State $18; 2 exemptions (not sure)
2007 - Gross Income $16194; I owed Federal $401, State 227 ; 3 exemptions
These taxes were paid through The Stimulus Package
2008 Gross : $18612.16; Federal $691; State $457; 2 Exemptions
All years I filed single, no dependents, no special credits deductions, etc.
I've since dropped down to 1 exemption. I'm also paying monthly taxes for '96 that accrued 10 year penalty fees because one of W2s were not attached to my taxes that year and the IRS filed them . I only found that out 10 years later when my bankruptcy attorney told me this was outstanding in '05-06. What can I do? I'm also paying back student loans.
Adjusted gross income - $16,333.
Taxable income - $16,333-$5150-$3300 = $7883.
Tax liability - $805.
If you filed W-4 as Single with 2 allowances (that is correct filing) - you’re withholding should be $708 and would owe $100.
Adjusted gross income - $16,194.
Taxable income - $16,194-$5350-$3400 = $7444.
Tax liability - $744.
If you filed W-4 as Single with 3 allowances (that is incorrect filing) - your withholding should be $334 and would owe $400.
You should be filing 2 allowances - your withholding should be $674 and would owe $70.
Adjusted gross income - $18,612.
Taxable income - $18,612-$5450-$3500 = $9662.
Tax liability - $1048.
If you filed W-4 as Single with 2 allowances (that is correct filing) - your withholding should be $962 and would owe $100.
It is possible that you (or your payroll person) changed withholding not at the beginning of the year - and that resulted large net liability - that should be investigated to identify the real reason.
2009 - Estimated
Adjusted gross income - $18,612 – assumed.
Taxable income - $18,612-$5700-$3650 = $9262.
Tax liability - $972.
If you filed W-4 as Single with 2 allowances (that is correct filing) - your withholding should be $459 - you should claim a new payroll tax credit up to $400 per person - and would owe $100.
If you do not want to owe - following are options:
-- On W-4 form mark additional withholding - $5 per paycheck
-- You may also put 1 allowance instead of two - that will result in $1006 withholding and you will be getting a credit $400.
Please be aware as any changes will be done not at the beginning of the year - their affects should be prorated.
If you are paying student loan - you should receive a form 1099-E - http://www.irs.gov/pub/irs-pdf/f1098e.pdf - that reports the interest you paid - that is deductible on your tax return.
If you have outstanding tax debt - I suggest setting installment agreement with the IRS.
Let me know if you need any help.