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I'm worried that I will have to pay taxes in 2018 when tax…

I'm worried that I will...
I'm worried that I will have to pay taxes in 2018 when tax season rolls around.Here's my situation:Recently graduated Dec. 2016, continued working part-time job (roughly 20-30hrs/week) until March when I began my full-time job (40 hours guaranteed). I still kept my part-time job and it became on-call (after averaging out) about 15hrs/month.Now I know I somehow ended up filing 3 allowances on my full-time job, as far as the part-time I can't quite remember. I'm single, unmarried and when applying for my full-time job I recalled HR mentioning that 3 allowances might mean I have to pay more taxes.This is my first year out of school, so not quite sure how to exactly go about this process and would love to reduce the amount of tax I pay. I contribute about 15% of my paycheck to my 401k (primary job) and about 10% to my Roth IRA.Please help!
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Answered in 2 minutes by:
11/6/2017
Mark Taylor
Mark Taylor, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 2,395
Experience: Certified Public Accountant
Verified

Hi, my name is Mark. I will be happy to help you with your questions. It is very good that you are contributing a large portion to your 401K and Roth account. The traditional 401K portion will help reduce your taxable income.

I can help see where you stand right know and project what it will look like at the end of the year. Do you have recent paystubs from each of your jobs?

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Customer reply replied 3 months ago
Hello Mark,I have a recent paystub from my full-time, however, not my part-time job. Curious, how long do I have access to you to ask questions? I can get it in the next couple of days.

I believe that the question would remain active for 7 days.

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Customer reply replied 3 months ago
Okay sounds good. Would you still be able to assist without it in the meantime? I can give rough estimates if that's any help

Yes, rough estimates will work fine.

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Customer reply replied 3 months ago
What sort of details would you need?

The information from your paycheck. Your taxable wages (gross wages less your pre-tax deductions)

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Customer reply replied 3 months ago
Here is my most recent paystub from my full-time job.

How often are you paid? Every 2 weeks?

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Customer reply replied 3 months ago
Correct

Ok please give me a few minutes.

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Customer reply replied 3 months ago
Okay thanks. Estimating my other job, I'd say I've roughly made about $4,230 YTD gross pay.

I based the projection based upon that your pay stub will not change for the rest of the year.

It looks like you will be a little short at the federal level. I am coming up with total taxes of $4300 and that you will have about $3,600 withheld. So you will owe about $700. This of course is not taking into any withholding on the $4,230. Any withholding from your side job will reduce this amount.

You are showing a refund of about $200 from California. Again this is not taking into account any withholding from your second job.

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Customer reply replied 3 months ago
Now what would be the ideal thing to setup for next year? I do plan on changing that allowance from 3 to either 2 or 1 as it was a mistake on my part. Do you have any recommendations as far as possible write-offs to reduce that amount at the federal level? I have some donations to charities, continuing education expenses.

Did you have any student loan interest last year?

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Customer reply replied 3 months ago
No loan interest at all, however, I did some prep classes/exams for graduate school admission this year.

The prep classes unfortunately would not be deductible. Changing your allowances will help. Putting as much as you are able to into the 401k is your best option. The other write offs like auto registration and charitable donations would only benefit if you are able to itemize. To itemize, your total itemized deductions needs to be greater than your standard deduction. The current standard deduction for a single taxpayer is $6,300. Itemized deductions include medical expenses, state taxes, auto registration, property taxes, charitable donations, and mortgage interest.

In the future, when you are ready to buy a property you would be eligible to take $10,000 from your 401K as a down payment. The $10,000 would be taxable but you would not be subject to an early distribution penalty. Some plans also allow you to take loans against your 401k balances. Although not ideal, this would allow you to obtain a down payment without being taxed on the amount.

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If this answered your question I would appreciate if you would take a moment to rate my response. This is the only way that I will receive credit for helping you today. There should be stars located above the question. If you have additional questions or need clarification I would be happy to continue the conversation. Thank you.

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Customer reply replied 3 months ago
Thanks, you've been great help. I do have one more batch of questions and I'll definitely star you 5.1. Any idea how much would be deducted if I changed my allowances to 1 or 2 and do you see a benefit of changing to either?2. Is there any benefit/disadvantages to having a 2nd job as far as tax options?Thank you again.

1. Each allowance will change the withholding by $23. So going from 3 to 1 allowance will increase withholding by $46 for each pay check.

2. No there is not a disadvantage to have a second job. Usually with a second job the withholding is minimal. So you would need to make sure that the withholding from both jobs is sufficient.

Mark Taylor
Mark Taylor, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 2,395
Experience: Certified Public Accountant
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Customer reply replied 3 months ago
Appreciate it Mark. You’ve been of great help, I’ll definitely prepare for the upcoming tax season.Thanks!

It was my pleasure. I was happy to help.

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