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Thread: Tax Questions

  1. Justice Beaver: The Crime Fighting Beaver
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    #1

    Tax Questions

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    OK, I've gotten several different answers on this questions so I'll let the brains on MSOS help!

    DF got a $25k reenlistment bonus which was taxed. I know he won't get all of the taxed money back, but he should get some of it back right?

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    #2
    Theoretically, yes. Depending on what his tax rate is. For example, DH's bonus was taxed at 28% but our tax rate that year was 16% (or something, I don't remember exactly but I know it was less than the 28) so he got back the difference.
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    #3
    Yes you will get some of it back. It will be factored in your W-2 when you fill out taxes. If it is nontaxable it goes in a separate box on the W-2.
  4. Justice Beaver: The Crime Fighting Beaver
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    #4
    Thank you!

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    #5
    It honestly depends on if you are already withholding more, less, or the exact amount you should. So I would ask that question first. The previous answers presume you were withholding either the correct amount or too much.

    The question being... Will you get that money back...

    If you are withholding less than you should at the new tax rate with the increase in income or withholding much less than you should have to begin with, you may not get all of it back

    Also, were you marginally close to a new tax bracket prior to the increase? Do you stay in the same tax bracket even with the increase? I know, leave it to the CPA to answer a question with a question but the answers to those questions will better help assess the situation further.

    What I'd do is calculate what your taxes should be at the increased gross pay level with the bonus, then look at the taxes you've paid in throughout the year, and that will tell you if you will get quite a bit back or not. I wouldn't even try to separate it into two separate pools... Just think of it like the IRS would...

    You made X in 2013
    You withheld X in 2013
    Then factor in your deductions and such
    A surplus gives you money back. A shortfall means money is due

    But to make things easier, you can also always use a tax calculator on HR Block or Taxcasters website to help
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    #6
    like CPA stated there are a lot of factors that will determine whether he will get it all back.

    is he claiming 1 or 0?

    did the 25,000 put him in a new tax bracket?
    if so did he adjust the rest of his with holding to reflect the new tax bracket?

    is he filing single with no deductions?

    Dh got a 33,000 dollar bonus, it not only jumped us up 1 bracket but 2. and we only changed the withholdings to reflect the one jump,
    they taxes DH's bonus at 28%, we owed 2400 that year. We lost earned income credit because it put us in a bracket over the EIC max.
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    #7
    Whether he gets money back will depend completely on your tax situation. No one can say for sure, and there are occasions where someone could get a large bonus and still owe money. Without looking at your full tax situations, it is impossible to know.

    That said, here is basically how it works. A bonus is no different than any other income. It is treated as just $33k more income, come tax time. That's all. Nothing special. You final tax picture for the year is the same as if he'd have gotten a $33k raise. However, when they pay the bonus, they usually take out a higher % than they do from his regular pay. That's why most people end up getting money back. So lets say your husband has 50k in income and is in the 25% tax bracket. (Numbers made up for easy math!). He'd owe $12,500 in taxes for the year. If they had only taken out $10,000 over the course of the year, he'd have to pay $2,500 when he filed. If he got a $20,000 bonus and they withheld from that at a 40% rate, then of that $20k they kept $8000 and gave him $12,000.

    But since he is in the 25% tax bracket, that will have been too much. So they'd owe him $3k from the bonus . (Since it was a 20k bonus, which at 25%, would be $5k. So since he paid 8k, he over paid on that part of his income by 3k.)

    So they owe him 3k from the bonus, but he owes them $2500 from what he underpaid on his regular income, meaning that in the end, he gets $500 back. (This assumed that none of the extra $20 from the bonus fell into a higher tax bracket.)

    It sounds really complicated. But the two things to remember are that it is just like any other income when it comes to what you pay on it once all is said and done, and that they usually take out a higher % than they do the rest of his income at the time it is paid.
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    #8
    it really does depend on your tax status and situation..

    however, every bonus DH has gotten we have gotten almost all the taxes back...

    There are 10 types of people in the world, those that understand binary and those that don't
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    #9
    Don't forget, you may each be able to deposit 5500 into a roth ira, which then comes off of your taxable income for this year, and may save you money!
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