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Estimating Taxes Before Promotion

August 28th, 2014 at 10:16 pm

With the new promotion and increased income, I figured I should check out where that puts us with taxes. We are still in the same tax bracket of 15%. But 15% of more is still more taxes!

I also realized and kind of knew that we would no longer be eligible to claim child tax credit on our daughter that turned 17. That right there is $1000 more in taxes than we have had in the past.

I have estimated that taxes(after the credit for one child) on our taxable income will equal $4,891. So far in eight months we have only had $2,308 withheld and withholding another $450 for four months will still put us short. I went ahead and changed withholding from 8 to 7. This will have us withholding $488 each month for the next four months. I could have made it more, but decided it was okay to keep it where it should be for next year and we will just owe the government again this spring. I expect in the end we will owe $630.

I plan to set aside $105 for the next six months for this particular debt. This way it won't be a big surprise or burden at tax time.

Each pay period we will have $440 more income after all the changes. DH and I did discuss this last night and he is all for just sweeping the money into savings knowing a move, and college are in our future. Seems like the best plan for now. We may evaluate retirement at the first of the year.

Do you evaluate your taxes anytime during the year? Or only at tax time?

5 Responses to “Estimating Taxes Before Promotion”

  1. Single Guy Says:

    The last few years I evaluate my taxes in September. Why? Because I front load my retirement accounts each year (I just hit the 457 limit this past paycheck) and to make it not so bad I lower my taxes to this point (I increase the # of deductions on my W2 to do this). After my next paycheck I need to calculate what I need to pay by the end of the year, and increase my tax withholdings accordingly. I can do everything online - no paperwork required - super easy for me. At the end of the year I remove the increased tax withholding and start anew.

  2. creditcardfree Says:

    Interesting, SG! Is this to get the contributions in early in the year? So you make sure to pay yourself first before the government...thus 'they' have least amount of your money for the shortest amount of time? Never thought of doing this but it sure makes some sense!

  3. FrugalTexan75 Says:

    My income for this year will be less than the last two, but next year will be a different story. I will definitely have to do some calculating then.

  4. Single Guy Says:

    Yes, that's right. I figure most years it is advantageous to get the money working for you earlier rather than later. Has worked for me well since 2009 (especially in 2009!). From a technical standpoint, you're not supposed to do this, so don't take this as official advice - ok? But if you always make sure to pay more than you eventually owe each year they don't seem to question it any.

  5. creditcardfree Says:

    @SG, Thanks! And I understand that it would not be the recommended advice of the IRS. Smile

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