Quick (Simple) Tax Question

[furryrabidbunny]

I went to efile tonight and I got a hefty federal return (enough to get rid of debt, yay!), but then when I did my state tax (AZ), I owed 158. That blew me away, but then I looked closely at one of my W2 forms and my stubs from a job I worked for a few months. Can't believe I never noticed this before, but they never withdrew state taxes at all. Line is blank on my W2 and is empty on my stubs. Thankfully I only worked there a few months though. My question is, is this legal to do and is there anyway I can make sure the company isn't trying to screw me over?

 

[swiftaw]

A company does not have to take any tax out of your wages. When you start a job you usually tell the company how much you want then to withhold by filling out a W-4 for federal taxes and whatever the state equivalent is.

 

[Kwyjibo]

Yeah I would imagine you filled that form out wrong. If your company has an HR person you can ask them about this to have a little bit taken out or simply foot the bill at the end of next year. You can also research this online with your state government to find out what the appropriate percentage is, for instance in Illinois it is 3%. But again I would be surprised if your employer did not try and do this but instead you simply claimed the wrong number on your w-4.

 

[it5five]

Being from AZ as well, I know what form you are talking about, and I don't think you could have filled it out wrong like some people are suggesting. For you out of staters, I don't know what the state tax forms are like for you, but in Arizona you put a check in a box, sign your name, put your social on the paper, and the date. It's one of the easiest papers to fill out at a new job.

 

[furryrabidbunny]

Being from AZ as well, I know what form you are talking about, and I don't think you could have filled it out wrong like some people are suggesting. For you out of staters, I don't know what the state tax forms are like for you, but in Arizona you put a check in a box, sign your name, put your social on the paper, and the date. It's one of the easiest papers to fill out at a new job.

Yeah, I really don't see how I could have filled it out wrong, but looking at the stubs they never took out state taxes. I haven' worked at the company for awhile, and this is the first place I've worked at that this has happen too. I really hate the people that work there, which is why I left, so I really dont' want to contact them if I dont need to. If I file with this (don't really care about how much it is, I can handle the amount), and it turns out to be an error on my side, could I get the money back?

 

[swiftaw]

Yeah, I really don't see how I could have filled it out wrong, but looking at the stubs they never took out state taxes. I haven' worked at the company for awhile, and this is the first place I've worked at that this has happen too. I really hate the people that work there, which is why I left, so I really dont' want to contact them if I dont need to. If I file with this (don't really care about how much it is, I can handle the amount), and it turns out to be an error on my side, could I get the money back?

There doesn't seem like there is a going to be an error. Both your records and theirs (the W2) indicate that no state taxes were withheld. So everything seems to be in order, except that now you owe AZ some money.

I'm not sure what error you are referring to. I could understand it being an issue if they were claiming they didn't withhold any state tax but your records indicate that they did.

The only mistake here is that the company didn't withhold the tax from your paycheck when they should have. As you don't work there anymore there is nothing you can or need to do about it. All records from all sides are consistent, so there is no error.

 

[furryrabidbunny]

I guess your right about not really having to worry, everything I have supports what I am doing so I shouldn't really worry. I'm still getting a nice return from federal after I pay AZ, enough to clear some credit cards, so I'm a happy camper

 

[WildCowboy]

Just a tip: In the future you can have your employer reduce your withholding so that you don't end up with such a large refund at the end of the year. That way you'll have more money in your own pocket to pay off those credit card bills at the time instead of giving Uncle Sam an interest-free loan while you pay through the nose on your credit card interest that's accruing.

 

[furryrabidbunny]

Just a tip: In the future you can have your employer reduce your withholding so that you don't end up with such a large refund at the end of the year. That way you'll have more money in your own pocket to pay off those credit card bills at the time instead of giving Uncle Sam an interest-free loan while you pay through the nose on your credit card interest that's accruing.

Normally thats how I fill out my W4, I don't like having to pay such a big lump sum. My other employer took out states taxes for 2006. Well hopefully my loan went to something good, like road repair or out of state trips.

 

[WildCowboy]

Just to be clear, I was referring to your federal withholding.

 

[furryrabidbunny]

Just to be clear, I was referring to your federal withholding.

Thats a whole different issue. I claimed no one because my parents were for awhile, but since I am out of school and I made too much they can't, so I got some money back from that. That will be fixed.

 

[Kwyjibo]

Just to be clear, I was referring to your federal withholding.

I wish there was a happy medium for this ... but for some reason the average person would rather get a refund, than owe even a little bit. If they owe a little bit someone must have screwed them! (I'm not speaking to the OP, you seem to have a firm grasp on this situation). Its a weird thing because it would be better to get the money, earn interest on it, and then pay your taxes. But instead most people would rather just get that big check at the end of the year.

 

[WildCowboy]

I wish there was a happy medium for this ... but for some reason the average person would rather get a refund, than owe even a little bit. If they owe a little bit someone must have screwed them! (I'm not speaking to the OP, you seem to have a firm grasp on this situation). Its a weird thing because it would be better to get the money, earn interest on it, and then pay your taxes. But instead most people would rather just get that big check at the end of the year.

It's because the vast majority of people have no idea how (or desire) to set a budget. Excess withholding forces them to keep their spending in check for the year (if they're smart...puts more on the credit card if they're not) and then the tax refund becomes a bonus. If they could only be arsed to have the proper amount withheld and then put that extra money aside rather than spending it, they'd be a lot better off.

 

[swiftaw]

It's because the vast majority of people have no idea how (or desire) to set a budget. Excess withholding forces them to keep their spending in check for the year (if they're smart...puts more on the credit card if they're not) and then the tax refund becomes a bonus. If they could only be arsed to have the proper amount withheld and then put that extra money aside rather than spending it, they'd be a lot better off.

I agree. Most people think about the refund as free (or extra) money. But really it's not it was yours all along.

I think if people knew how much was going to be withheld it could help them, but it's hard to find that info out. (For example, if you make $x a year and you claim 2 exceptions on your W4, how much will get withheld?) If I knew that, I would get them to withhold nothing, but put the money that I should have had withheld into a 12 month CD. After a year, pay the taxes with the CD and pocket the interest.


Of course, the problem with this method is that the federal government doesn't like it when your withholdings are too far off from what you actually owe. They will actually impose a penalty on you if you owe too much come April or if they owe you too much. In other words they want your withholding to be close to correct.

Anyway, I have learned a valuable lesson this year. If you are going to move to a new state, only move at the turn of the year, else you have to file as a part-year resident in both states and thus cannot use the easy 1 page form, but rather the monstrous 5 page form when filing state taxes. It gave me a headache.