I still haven’t done our taxes yet. Part of the reason for that is I am waiting until the end of the month to increase my savings a bit so I don’t have to dip too much into our emergency fund to pay the bill. I am also still waiting for a W-2 from one of Mrs. ROB’s jobs. I think that when we moved they had our old address on file and the post office didn’t forward the document. So we need a couple of more documents before I can fully do our taxes. But I wanted to take a minute and explain how we got here. Maybe our story will help others.
The primary reason Mrs. ROB and I are in our tax mess is because we didn’t have enough money taken out of our taxes and I will blame myself for this because I should’ve realized that I needed to go above and beyond normal taxes taken out.
Now both Mrs. ROB and I claim zero deductions for our W-4s. You would think that would be enough for the government to take taxes out of our accounts. However, there is a problem with that thinking and I blame myself.
First, Mrs. ROB is a part-time instructor at different colleges and universities in our area. Mrs. ROB would love full-time, but because of some extenuating circumstances hasn’t really done a major job search in a while. Despite that she has been able to cobble together enough classes during the school year and during the summer to make a nice little income. The problem is that even though she claims 0 deductions at each job, she has three separate W-4s. The IRS doesn’t combine her income at each place so that her tax withholdings go up as she makes more money for the year. For example, say she made $10,000 at one place, $20,000 at another, and $15,000 at another place. At each place she would be taxed at the 10% rate until she hit 9700 and then it increases to 15%. However, because the IRS doesn’t combine her income while she goes along her 15% threshold arrives later in the year for each position. She is not having enough taxes taken out to meet her tax burden that she will have at the end of the year.
Second, while I have a full-time position at my current institution I also teach overloads. When I do teach those overloads or if I teach during the summer my institution makes me sign a separate contract, which means that it is not part of my regular salary. So I am, in some respects, actually holding two jobs at the same place I work. That extra money is taxed at a separate rate starting with 10% and then moving up to 15% throughout the year. However, if you add up my salary and those extra courses not enough taxes have been taken out from those extra courses so it leave me under taxed as well.
When you combine Mrs. ROB and I incomes together we fall into a 25% tax bracket, but our incomes have been taxed (except for a smaller portion of mine) at the 15% rate. Thus, we have a tax mess.
For whatever reason, I thought that claiming 0 deductions would be enough to relieve our tax burden. I was stupid and wrong. I made a huge mistake and it will cost us a pretty penny to remedy it.
We Itemize But It Doesn’t Help Much
A way to solve part of this situation is to increase our tax deductions, which I try to do every year. Last year was the first year we itemized and it saved us a bit, but not enough to stop the tax man. This year, we bought a house, which is great for the mortgage and property tax deduction, but because we bought it so late in the year it won’t yield much in terms of tax benefits.
Ironically, our biggest deduction will be miles driven. Because we take the home office deduction and Mrs. ROB (and I do as well) to multiple places each day to teach we can deduct the distance between institutions. And this year both Mrs. ROB and I drove quite a bit going back and forth between different institutions. That will help, but it isn’t enough to get us out of the mess we are in.
In the future I am hoping that our taxes will go down because I have increased my retirement contributions at work. I am signing up Mrs. ROB for a regular IRA, which will reduce our tax liability. We also will be able to take advantage of being homeowners this year because we can deduct a full year’s worth of mortgage interest, property taxes and Mrs. ROB continues to drive from institution to institution.
Cross your fingers and hope when I write about this in early 2016 that we don’t owe the IRS anymore money.