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Posted by TheMightyAtlas on March 20, 2008, 8:38 am
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On Mar 20, 12:40 am, vmoel...@austin.rr.com wrote:
>
> Well, here's what happened, in a nutshell. This is my 2nd year
> working as a high school choral assistant. For tax year 2006 (last
> year), I ended up owing $2,000 because the district treated me as a
> contractor and refused to withhold anything. I set aside some money
> with each paycheck, so I was able to pay off IRS last April.
>
> Trying to avoid this happening yet again, I set aside $200/mo last
> fall plus some Christmas money my mother gave me, so I now have just
> under $2,000 at this point (mid-March). However, I used TaxCut to do
> my taxes, and lo and behold, the raise I got from the school district
> put me into a higher tax bracket, so now I owe $4300. Last month, I
> consulted my church's accountant, and she advised me to divide the
> $4300 by 10 (there were 10 months remaining in this year) and adjust
> my income checks accordingly by deducting at least $400 more per
> month, so I got her to deduct $200 more per month from my church check
> (I'm an organist there) and I called my state retirement agency and
> got them to deduct $200 more per month from my retirement check.
> Hopefully, I can also set aside another $500 or so just in case I need
> to for taxes next year. I'm also planning on taking on piano
> students, so I will need to set aside 20% of my self-employment
> earnings from that venture to be right with IRS next year.
>
> Thanks for writing.
>
> vhm
>
I think I see the problem. You effectively have three sources of
income (day job, retirement, and church), and the tax rates being
progressive, your tax rate on the second and third ones is much higher
than it would be if they were your only source of income.
You will probably have to have something like 30% deducted from each
of the retirement check and the church to avoid being under-withheld
each year. When you got your raise at the school, they had no way of
knowing that this would kick you into such a high bracket, because
they can't see your other income.
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