Military Retirees?

[Mac in Wisco]

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Ok, that gets back to the gist of my posts then. Do not give the feds money that you will not owe them at the end of the year. You do not make enough money to be paying anything in federal income taxes. For 2011, as a married couple, filing jointly, you would have to make more than $19,000 to even begin to start paying any federal income taxes.

If you had no taxable income for 2010 and you expect no taxable income for 2011 then you can declare yourself EXEMPT from federal withholding taxes. Have your husband log onto his mypay account or call DFAS and adjust his federal withholding to an Exempt status.
Do not do this for state withholding though, as your withholding for state taxes is right on the money.

If he paid in $500 last year, that is a little over $40 a month that could have been back in his retirement check. Since the withholding tables have been revised to withhold at an even higher rate this year, they are going to be taking even more money that y'all will not owe at the end of the year.

 

[Mac in Wisco]

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The new withholding tables go into effect in March for retirement pensions. You should be receiving a new retiree pay statement that shows the changes.

In fact our statements just showed up in the mailbox ten minutes ago. Between our two pensions, federal withholding has increased a little over $100 a month, which will add up to over $1000 in extra withholding for the remainder of the year. We will not owe that much more in federal taxes though, so I need to make some adjustments.

The included newsletter warns that most people will see their net pay go down and that they need to review their withholding elections to ensure that they are correct for their particular tax situation.

 

[speckledhen]

I think Mac is going to be the BYC tax consultant, LOL.

 

[SallyF]

Works for me... where do I send the shoebox full of receipts?

 

[sfw2]

 

[Mac in Wisco]

The bottom line here is that the 2011 tax rates didn't really go up, but because of the way they implemented a certain tax credit for regular jobs the federal withholding rates are going up.

Withholdings are just estimated payments on your end-of-year tax liability. You control how much they take in withholding by filing a W-4 with your employer and telling them to what extent your earnings are exempted from income tax. You do this by claiming a certain number of exemptions on the W-4. If you claim Zero exemptions from income tax then your employer withholds at the max rate and sends it to the government. The more exemptions from income tax that you claim, the less that is withheld. At the end of year you file an income tax return that reconciles the difference between what you paid in and what you actually owe for the year. You have to make a close approximation of the correct number of exemptions though. If you don't withhold enough and end up owing the IRS more than $1000 at the end of the year, you will pay a penalty.

The one thing that people overlook after filing their tax return each year is reviewing their tax refund (or payment) and adjusting their withholding appropriately. If you get a $1200 refund, you should be asking yourself why. That is $100 a month that could have been paid to you in your paycheck, instead of sending it to the government to be recouped at a later date.

Any time your financial situation changes, you should do the same. If you get another job, lose a job, buy or sell a house, get married or divorced, have a baby, etc., you need to review your claimed exemptions to ensure that you aren't paying too much (or too little) in withholding.

 

[Mac in Wisco]

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Not here... They'll get mixed up with the rest of the shoeboxes.

 

[Mac in Wisco]

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I went to the IRS website and ran the withholding calculator for our incomes. I calculated that we would have a $2700 tax liability for the year, but there is also a $2500 tax credit available for my son's college tuition that we are starting to pay out of pocket this year. So our actual liability for the year will be $200. We have already paid that amount in withholding the last two months, so we are done with withholding for the year. I adjusted our W-4's so that we are not paying any withholding the rest of the year. That puts $230 a month back in our pockets.

 

[hollymh]

The system is so messed up right now , I'm sorry to hear about the decrese, hubby was thinking of retiring but the benefits don't seem worth the investment

We are active duty and there is a hold on our hard-copy orders until 4-8wks before our report-no-later-than date b/c of funding issues. It's crazy, they expect us to move from overseas in 4wks and re-enlist for 5 years without hard copy orders

 

[Mac in Wisco]

Did anybody find that helpful, or am I wasting time talking to myself again?