Wednesday, January 30, 2008

Boo, Taxes!

I am totally going to owe the IRS money. I got my W-2 today and immediately entered it and my ING 1099 into the same free e-file site I used last year. Looks like I'm going to owe the federal government $116 and NY State $28. And I haven't even entered my Bank of America 1099 yet! It's not a lot, but I'd still rather owe nothing, for obvious reasons. Thankfully, I wasn't counting on a refund, and kind of had a hunch this might happen, and if I have to raid my savings to pay my taxes, that's what I have to do. I should probably consider adjusting my witholding for this year, since I'm going to (hopefully) have the $1500 of extra income above and beyond my W-2.

I'm almost wondering if it's worth trying to itemize in order to make it come out even. Medical, state & local taxes, and charitable donations almost might squeak past the standard deduction...but is it really work $200 to try to add up all that stuff?

15 comments:

MEG said...

Of course it's worth it! It's not hard to add it up; just add all your deductions you could take and see if they exceed the standard deduction. If yes, then it's worth it to plug them all into your tax return.

There are calculators online that will help you see how much tax you'd save. You can do it in just a minute or two.

Just make sure you can document/verify your deduction amounts in case of an audit (though of course the chances of that are slim).

MEG said...

Oh wait - I just reread your post and realized you're asking if it's worth it to even track down all your expenses to SEE if they exceed the standard deduction.

My guess on that is no. Your biggest deduction will probably be your state/local taxes paid (which is on your W2) unless you own a home. If you're not even close after that, I wouldn't bother trying to stretch your charitable contributions and track down medical receipts.

The IRS prefers people to use the standard deductions, so they make it pretty high to entice people. You'd probably have to exceed it by $500 or more in order for it to be worth itemizing.

Dasha said...

I graduated same time as you did and this is my first year not getting a big, fat refund. I am sad at that loss- but I am trying to be rational and think about how I hadn't loaned out much money this year. I owe the feds a little bit and am getting a bit back from the state- I think this is really interesting compared to your situation because we have almost the same salary but I save much less because I have a TON of undergrad debt.

Mrs. Micah said...

For $200 if you're not sure if you qualify...I'm not sure. I honestly would probably not do it just because of all the time unless I thought it was really likely.

Kim said...

What e-file do you use? I've never had to file "big girl" taxes until now...I was always just lumped in under my parents'...but I'd be interested to know what tools you're using!

SavingDiva said...

Ugh! I'm worried about having to pay state and federal too...I'm still waiting for a w-2

michelle said...

I think you mentioned earlier that you had done some freelance work - can you deduct part of your rent and utilities? I had mostly freelance income last year, and saved a lot by taking the deductions. I had an accountant, though, as I was also dealing with complicated multi-state stuff - you may need to upgrade on the tax software for this (not sure).

Chuck said...

I see you mention itemizing medical. Not sure if you are aware, you can only deduct your medical expenses that exceed 7.5% of your adjusted gross income which for most people would mean you were very sick.

Also as to Kims comment about efiling, there are many places that will let you efile for free if your AGI was under $54k. There may be some other exceptions as well, the IRS website has a list of companies that offer it.

Urmi said...

Also please try www.taxactonline.com - they do federal e-filing for free and only charge for state taxes - for California this year it was 13.95. So I paid a total of 13.95 for both state and federal and got my state refund in less than a week and am still waiting for my federal refund!! This is the second year that I have used it and am quite happy with it.

Escape Brooklyn said...

That's frustrating!

I have to agree with the folks who said it takes a lot of money in medical expenses and charitable donations to beat the standard deduction. The only reason I'm getting a tax refund is because I paid a ton of interest for student loans and mortgages, which don't apply to you.

I've always used TaxCut or TurboTax software to do my taxes, so I'm not sure if that's better or worse than the free online option.

S/100/30 said...

Just to echo everyone else: don't get your hopes up about the medical deductions. I had an unbelievable amount of medical expenses before I had my house but because of the threshold it never surpassed the standard deduction. It wasn't until I had mortgage interest and property taxes to deduct that it made sense to itemize.

d^2 said...

when you owe the gov't money, it effectively means that the gov't loaned you that 200 dollars interest free!

if you get a return, that means the gov't borrowed from you interest free!

seems like owing the gov't a small amount is better than the reverse.

Anonymous said...

Urmi--

I tried that taxactonline, and oh man, am I glad I did --you just saved me $185 (tax preparer fee)! Thank you! The interface is very easy to use.

Margo said...

State Farm gives away free TurboTax online to its customers. Found it on a blog last year, and it's still valid.

I found out I owe $850 federal and $225 state.

If I'd had to pay for tax filing to find that out, it would be insult on top of injury.

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