2009, earning wise, was a pretty incredible year for me — I sort of giggled to myself as I filled out my year ending wage forms into the 1040 form. Going back to college in 2006-2007 was the best decision I ever made, even if it did take me several months to find a job, and even if, when I did taxes last year, I had five different W-2s and had to figure out the partial filing for DC and Maryland residency.
And then I continued doing my taxes. And my glee turned to solid WTF.
I began applying for part time jobs almost as soon I was offered my full-time position, and indeed, I interviewed at the Bookstore my first week working in this area — I delayed my start-date by two weeks, but both jobs I work now I began at practically the same time.
And my part-time job, which has been such a life-line and a necessity, which I worked so much it accounted for fully a fifth of my income in 2009 (and when you consider how much less I get paid there, that is truly amazing), truly and totally fucked me.
There are two parts to this problem:
One — Because I have automatic deposit, I do not see the pay stub and I did not pay attention to how much has been being withheld. Or, rather, not being withheld.
My full time job withheld a bit over 10% in Federal taxes, and 5% in State. Contrast this with my part-time job, which withheld about 3% in Federal taxes, and 2% in State. The end result is that I owe about $1800 in taxes.
And — seriously, what the fuck? One of my coworkers suggested HR removed so little because they figured part-time employees needed the money to spend, which makes little sense since they’d just wind up getting completely fucked at tax time. Then again, for my coworkers who don’t have a better paying job, they might qualify for some sort of EIC. So, who the fuck knows.
For a very short while, I thought my HSA would save me. Until I took a closer look at my full-time’s W2, which removed my HSA contributions before entering my total earnings on my W2′s line 1.
Look, I get the argument that suggests people should prefer to have to write the government a big fat check at tax time because it means they get to earn interest on their money when the Feds and Staties might already have it, but to be bluntly honest, I like getting a big fat refund in April. I sort of look on it as a back-door savings account, or a rainy-day spending fund, or whatever, y’know?
In any case, this has put into sharp relief my financial failures, notably, my lack of a savings account. Well, I have one, but it’s pretty pathetic and won’t put so much as a dent into what comes due on April 15th.
So, for the next two months, I’m on a tax-inspired spending freeze. I won’t be eating out. No bars. No new books. No new media. I’m probably going to finally cancel my cable TV (which I’ve been thinking about doing since Battlestar Galactica went off the air), and probably end my Netflix (I’ve had my current selections since last year).
After this week (I have to work late a few evenings at my full-time job to make up for last Tuesday, unless I want to use my vacation time, which I don’t), I’ll be calling in every day to the Bookstore in the hopes of picking up shifts wherever possible.
And as soon as these checks are in the mail, I’ll be submitting revised W4 forms at both jobs, requesting additional money withheld from my checks.
It’ll be tight, but I should be able to meet my tax obligations. Otherwise, well, I’m hoping both the Feds and DC won’t screw me too much over late payments.
It should also go without saying that I’m very glad I did not wait until April 14th to do my taxes, or I’d probably be running down Connecticut Avenue looking for a bank to rob.
UPDATE:
So, two big things — one, I turned in a revised W4 form at the Bookstore. In addition to hopefully correcting the issue, I also requested an additional small amount be withheld from each paycheck towards my Federal taxes. So next year, while I might not get a gigantic refund, at least I won’t be scrambling to find $1800.
Regarding that $1800, it turns out the IRS has an installment plan taxpayers can utilize! So I am no longer in full-blown panic mode. I can pay my local taxes in full, pay about a third of my Fed tax, and then pay the rest out over a month or two. Hooray!
Despite being one of those types that would rather have my money working for me all year than get a super-big refund, owing at the end of the year is a bummer. Hopefully you don’t owe penalties for underpayment.
Having multiple employers can be tricky, withholding becoming a more complicated issue. Out of curiosity, did your part-time employer not have you fill out a W4 when you started?
Comment by Alex — February 14, 2010 @ 8:49 pm
Alex – I’m pretty sure I filled out a W4, and I have a vague memory of filling out a revised W4 not long after I started.
Comment by MalSnay — February 14, 2010 @ 9:01 pm
The problem is that each job taxes your wages as if it was your only job. If the part time job were your only job, you would owe hardly any taxes.
Instead, your p/t wages need to be taxed as if they were bonuses to your f/t job and withheld at your marginal rate. They need to have a way to do that.
You get the same problem but to a slightly lower degree with a working spouse when the wage disparity is large.
Comment by yellojkt — February 14, 2010 @ 9:56 pm
[...] After discovering what he owes in taxes, Malnurtured Snay writes: For the next two months, I’m on a tax-inspired spending freeze. I won’t be eating out. No bars. No new books. No new media. [...]
Pingback by DCBlogs » DC Blogs Noted — February 15, 2010 @ 12:46 am
For Lent last year, I stopped spending money on non-necessities. I read the books on the shelf I hadn’t gotten to yet. I made the lunch I took to work. And on and on. It was easy; it really helped me get a perspective on my spending; and I changed my habits as a result. I hope this will be a really good thing for you too.
Comment by imgonnabreakyourheart — February 15, 2010 @ 10:48 am
yellojkt – Yeah, grrr! I’ll be sending in a revised W4 at Borders, and possibly at my f/t job, too.
imgonnabreakyourheart – I did that late August into September, and it was great. This is a necessary kick in the rear, and I’ve probably got fifty books on my shelves I haven’t read. Most fortunate, I learned that I can do an installment payment plan, so I’m not quite as panicked as I was last night. :)
Comment by MalSnay — February 15, 2010 @ 11:06 am
Don’t wait to change your withholdings. Submit the forms NOW.
The goal is not to give the Feds an interest free loan for a year. The goal is to get as close to “even” as you can come April 15… owe a tiny bit if you must.
You were smart to figure your taxes early.
You might also look for more deductions (donations to charity, etc.) that you may have, *cough*, overlooked.
Comment by lacochran — February 15, 2010 @ 12:30 pm
The US tax system must be vastly different from the Canadian one… for us, if you fill out the T1 (equivalent to your W4, I think) for one job, you don’t need to fill out one from a secondary job. So, basically, in your position you’d only be getting taxes deducted from your RK job and not the Bookstore. YMMV, and apparently does…
Comment by Chris M. — February 15, 2010 @ 3:36 pm
As yellojkt noted, “Instead, your p/t wages need to be taxed as if they were bonuses to your f/t job and withheld at your marginal rate. They need to have a way to do that.”
They do have a way to do that. It’s even mentioned on the instructions for the W-4, “Two earners or multiple jobs. If you have a working spouse or more than one job, figure the total number of allowances you are entitled to claim on all jobs using worksheets from only one Form W-4. Your withholding usually will
be most accurate when all allowances are claimed on the Form W-4 for the highest paying job and zero allowances are claimed on the others. See Pub. 919 for details.”
Here’s links for the 2010 W4 and Pub. 919 which contains a myriad of examples for adjusting withholding. Your particular problem is shown on page 6, “What if I have more than one job or my spouse also has a job?” They even talk about changing withholding in the middle of the year in the previous section. If you do this (and you should), you’ll have to re-file your W-4′s in 2011 or you’ll be taking out too much.
In reality you want to balance this so you owe the gubbmint as much as you can comfortably pay without incurring a penalty.
Comment by Alan — February 15, 2010 @ 10:11 pm
This happened to me several years ago, when I was working multiple jobs.
The way it was explained to me is, the software that calculates your payroll taxes takes your gross pay and multiplies it by 26 (or 52, depending on how often you get paid), thus making an assumption that A) this is your only job; and B) that’s about what you’ll make for the entire year.
At that time, we had to take a stab-in-the-dark guess as to how much “extra” we wanted deducted from each check. Nowadays the W-4 has specific instructions (as Alan notes) to help you calculate what needs to come out.
Comment by Claude — February 16, 2010 @ 7:31 am
Regarding your update, if you end up owing money at the end of 2010, you can’t be assessed a penalty if you paid more than you owed for 2009.
I don’t know at what owed amount the penalty kicks in, but it’s something to keep in mind.
Comment by Alan — February 16, 2010 @ 12:41 pm
[...] control I’ve let my life go. Namely, there have been three incidents: first, the realization that I owe close to two-thousand dollars in taxes to the DC and Federal governments, especially shocking as I was expecting a refund; second, Tippy’s health-scare, which taxed my [...]
Pingback by Malnurtured Snay » It’s Never Too Late To Make A Good Resolution, Is It? — March 4, 2010 @ 11:33 am