Earlier this week I spent a few minutes estimating my family’s taxes for last year. It was a rough estimate, a VERY rough one since I used excel and have not received any of my year-ending statements such as W-2s, mortgage and real estate tax reports, investment interest statements, etc… The reason for this excercise was not to see how much of a refund to expect but to be prepared in case we DIDN’T. In other words it is a good idea to know a tax bill is coming so that we would have time to save up for it.
Over the past several years I have been able to calculate our tax withholdings fairly accurately, usually within $500. I was relieved since this year a new wrench was thrown into the mix – the “Making Work Pay” tax credit. While the credit allowed us to keep more of our money, it had an unintended consequence. The credit was divided equally through payroll deductions and most of us saw about $10 – $15 less taken out of each payroll check. The problem is that those of us with more than one job or multiple household incomes may have brought home more money from all jobs and could have ended up owing instead of getting a refund. If you would like to hear more information in a short podcast then I would recommend MoneyGirl’s episode #127 “Making Work Pay Confusion Could Cost You“.
My “wet finger in the air” calculation shows that we will get a refund this year. I decided to get a second opinion (yes, I actually like running calculations and spreadsheets). This time I headed to DinkyTown.com and used their “1040 Tax Calculator“. It came within $80 of my estimate, so I am confident that I won’t be sending any more money to the IRS for last year. Here’s a link, go knock yourself out! http://www.dinkytown.net/java/Tax1040.html