HometaxesIt's a good thing I checked

It’s a good thing I checked

It’s been a long time coming, but after eight months of drama, frustration, and a heck of a lot of patience, Girl Ninja finally got to sign a teaching contract for the 2010-2011 school year. Is it pretty stupid that she didn’t get her contract until the second to last month of the school year? YES, but at the end of the day a contract is a contract, it doesn’t matter if it comes on the first day of school or the last. We recently received a lump sum back-payment from the school district which brought her YTD salary in line with regular teacher rates. The check was a huge blessing and a very important reminder, a reminder that although taxes are important, they suck… bad.

The $10,000 gross pay she received had $2,800 in taxes taken out of it. Now I’m not a tax guy, but I knew there was no way we were in the 28% tax bracket (according to my estimated taxes). Why the heck would the school district take so much out? I still don’t know the answer to that question, but I’m sure glad they did.

At first, I was convinced we’d be seeing about $1,000 of that $2,800 back in form of a tax refund. That would make sense seeing that our marginal tax rate is roughly 18%. After a lot of number crunching, I discovered Girl Ninja and I were unknowingly setting ourselves up for a a rough tax season next April.

I was on track to pay about $7,500 in federal taxes this year. Girl Ninja, prior to the lump sum payment, would have paid about $2,500, for a total joint payment of around $10,000. I then went to the IRS’s website and ran some numbers to see what our estimated tax obligation would be this year. The result was surprising…$14,431.

Holy Guacamole, we would have unknowingly owed about $4,000! But since Girl Ninja’s retroactive pay added $2,800 to our tax payments, we’d now only end up being $1,200 behind. In an attempt to owe (and be owed) nothing next tax season, I submitted a new W-4 to my employer so an extra $150/month was taken out of my paycheck.

Had Girl Ninja not received that lump sum payment, I never would have thought to check our 2011 estimated tax obligation, which means I would not have realized we were underpaying our taxes until it was too late! Have you ever been blindsided by your taxes? Ever owed way more than you thought (or got back way more than you expected)? Have you checked your 2011 estimated tax obligations to make sure your payments are on track?




  1. I was floored this year by how much I got back. I paid 11k, I got 3k back. That might not seem completely crazy, but I had quite a time trying to wrap my head around the fact that I paid only 8k last year (or about $667/month) for full health insurance, defence, roads, bridges, consular services, access to primary and secondary schools (not applicable at this particular point, but good to know it’s there!), and a fairly robust social safety net.

  2. I could be wrong, but I think that when you receive a paycheck, the taxes are taken out with respect to what that *paycheck* would extrapolate your salary to for the year and what bracket that corresponds to, rather than what you/the company thinks your salary for the year will be. So if I work a lot of overtime or receive some kind of substantial bonus (like my initial signing bonus), the percentage taken out is higher than weeks in which I only receive regular salary if it’s large enough to correspond to a different bracket. Then the refund at the end of the year would compensate for the temporary bump in taxes paid. Or in GN’s case, because she wasn’t receiving her full salary before the lump sum, the taxes being withheld were too low.

    Ninja, it’s probably more difficult to calculate estimated withholdings for a married couple, but have you been able to discern why, through all your number crunching, the withholdings you had from last year weren’t sufficient? Had your allowances changed, or have you changed expected contributions to different accounts enough to throw it that out of whack?

    • Our allowances hadn’t changed but our tax bracket did. We will make about $30,000 more this year than we did last year. More money = more taxes. Apparently our tax withdrawals weren’t proportionate to our increased income.

  3. When you say marginal rate, you are talking about your effective rate? Or adding in payroll taxes? I thought marginal rates went like 10, 20, 25, 28, 30, etc?

    • Yeah I meant effective tax rate. When I googled effective tax rate a link shot up saying it was the same as marginal. Perhaps that was incorrect information.

  4. Your illustration shows a Holy Avocado, which is just one of the ingredients in Holy Guacamole.

  5. Ninja, I have posted something similar!!!! I got married early this year, and when I ran the figures through that IRS calculator, I got a huge kick in the ass (like a $4500 tax bill). What are your W-4 statuses? Being married definitely complicates things, tax-wise, ESPECIALLY when you’re a two-income household. My wife and I adjusted from each being “Married-1” to “Married-0” — It was confusing to think that even though we are entitled to two allowances together, we shouldn’t take any of them. Currently we aren’t adjusting our tax withholding, BUT we’ve budgeted an additional $150 per month into our Emergency Fund just in case we get hit with a big tax bill. We’re coming up on the mid-year mark, and that’s when it gets easier to forecast your tax liability for 2011.

    PLEASE keep posting more thoughts/advice about taxes because I believe my wife and I are in the same boat as you with respect to income, so maybe our situations will pan out similarly.


    • Sounds like the exact same deal marriage makes things trickier. I have girl ninja claiming a Single 1, and I was claiming married 2, but now changed that to married 1. After a few months I’ll look back at our tax payments to make sure wearent over/under contributing.

  6. I am such a nerd that even though I’m a salaried employee, I run estimated taxes quarterly to ensure that my withholdings are correct …

  7. I was the first time I had to pay taxes after college. Definitely wasn’t excepting to have to shell out that much money! To go from always getting money back to owing money was a little bit of a brain twist.

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