How to reduce tax returns?

[ltrain823]

Hello everyone, I am definately not educated in this matter and was hoping to get an outline of what I have to do. I am expecting to get $11,000 from federal and $2,000 from state this year. I am planning to file Ch. 13 right after I get my checks (atty said so).

My atty also said that the trustee will begin taking this every year during BK so I was hoping to figure out how to make this check smaller and hopefully my paychecks larger.

The reason for the large check is that I have a business that took a big loss in 07, bought a house in 07, have a full time job making 75k, and I'm single. My parents live with me, my mother is running the business that is losing and my father is unemployed, I am claiming my father as a dependent.

What/How do I get this down? I have read in some posts but it doesnt make much sense to me on how to do it, please try to explain in layman terms

I will do whatever it takes to get this down. I really appreciate anyones insight...thanks again!

[pa308]

First thing go to IRS.gov and look up w-4 and worksheet that goes with it. It sounds to me like you are probably claim too low of an exemption on your w-4 which drives how much your employer withholds. Do the worksheet and see what it says your exemption the w-4 should be. Thats your first step for federal

[HHM]

You would contact your HR person (or whoever handles payroll) at your job and ask them for the form to change your tax with-holding. That person can probably explain, specifically, what you need to do. But you will be upping the number of claimed exemptions (or dependents). I think the max you can claim without having to prove it is 9 or 10. But realize, if you do this (1) that will increase the amount you get on your check, thus increasing your monthly income (this could impact your chapter 13 payment), (2) it may lead to you having to PAY taxes each year, so you are going to have to have money set aside to do so.

[ltrain823]

You would contact your HR person (or whoever handles payroll) at your job) and ask them for the form to change your tax with-holding. That person can probably explain, specifically, what you need to do. But you will be upping the number of claimed exemptions (or dependents). I think the max you can claim without having to prove it is 9 or 10. But realize, if you do this (1) that will increase the amount you get on your check, thus increasing your monthly income (this could impact your chapter 13 payment), (2) it may lead to you having to PAY taxes each year, so you are going to have to have money set aside to do so.

If you do this after you get discharged how could it effect you? If I my gross income stays the same how will the trustee know? So I'm allowed to claim up to 10??? How can I get away with that without having any real proof? I really can only claim my dad and maybe my mom. I'm just getting raped in taxes all in all. I get paid $3,000 bi-weekly and only get $1,900 out of it after taxes.

Thanks for the quick response...

[pa308]

How many exemptions are you claiming now?

[ltrain823]

How many exemptions are you claiming now?

Excuse me if I sound stupid but I honestly dont know what that means. If you are asking how many people I am claiming than that is just 1, my father

[HHM]

It is not a big deal, you can claim up to 9 or 10. (I forget what the max is).

I don't think you meant to say "after discharge" but instead, "after filing". In any event, since it sounds like the trustee takes tax refunds in your area, then the trustee will see each years tax returns, thus, he will see how much you paid in taxes, your gross income, etc.

When you took your job (assuming you are not being paid under-the-table, or a 1099 independant contractor), you would have filed out form W-4. On that form, on Line D, it asks you how many dependants you are claiming (note, on line A, you claim yourself, on Line C, you claim your spouse, and line D is for all others). I believe, the total you can claim, without proof is 10 (including yourself).

From the IRS perspective, it really does not matter how many dependents you claim, the IRS gets the same money from you. The W-4 only effects how much is withheld each month. Come tax time, you fill out your taxes as normal, but if you claimed more dependants, that means you simply paid less tax (during the year), thus you either get a smaller refund or end up owing the IRS.

[ltrain823]

It is not a big deal, you can claim up to 9 or 10. (I forget what the max is).

I don't think you meant to say "after discharge" but instead, "after filing". In any event, since it sounds like the trustee takes tax refunds in your area, then the trustee will see each years tax returns, thus, he will see how much you paid in taxes, your gross income, etc.

So lets say I file, the trustee/court decides on my monthly payment and then I change the tax information, you're saying that even after it's all said and done the trustee will change my payment next year when the tax's seem less than normal?

[HHM]

So lets say I file, the trustee/court decides on my monthly payment and then I change the tax information, you're saying that even after it's all said and done the trustee will change my payment next year when the tax's seem less than normal?

It is "possible". This is where you and your attorney really need to sit down and hash out your expenses (and pad some of them) to make it unlikely that will happen. Trustees don't like to tinker with plans once the plan is confirmed, so the risk is minimal, even with decreases withholding, it will not increase your gross income significantly.

But yes, after your plan is "confirmed". The trustee can move to increase your payment if they see a significant increase in "disposable" income.

[ltrain823]

It is "possible". This is where you and your attorney really need to sit down and hash out your expenses (and pad some of them) to make it unlikely that will happen. Trustees don't like to tinker with plans once the plan is confirmed, so the risk is minimal, even with decreases withholding, it will not increase your gross income significantly.

But yes, after your plan is "confirmed". The trustee can move to increase your payment if they see a significant increase in "disposable" income.

What if I still have a lot of room for federal exemptions? From what I have learned is that you do get a cushion to work with and I seem to be well below my exemptions. I have 0 equity in my home...which is supposedly why I'm going to be able to keep my tax returns (fingers still crossed).

[pa308]

Excuse me if I sound stupid but I honestly dont know what that means. If you are asking how many people I am claiming than that is just 1, my father

http://www.irs.gov/pub/irs-pdf/fw4.pdf?portlet=3

Not stupid at all. This link is for the IRS w-4 form. It has instructions on how to figure out how many exemptions to put on your W-4. Your W-4 drives the withholding in your paycheck. The higher the number of exemptions on your w-4 the less tax that is withheld. Some people however like to have a big tax return (like a no interest savings plan). So basically if someone claims zero they have the maximum withheld from their paycheck and a big refund at tax time. I'm not sure what the max is.

You fill out this form and supply it to your HR department. Anytime you take a new job you would fill out one of these, but you can change it when your at the same job as well. I changed mine when my kids were born because I like to get my money in my paycheck and not have to wait for Uncle Same to give me my money back.

[ltrain823]

http://www.irs.gov/pub/irs-pdf/fw4.pdf?portlet=3

Not stupid at all. This link is for the IRS w-4 form. It has instructions on how to figure out how many exemptions to put on your W-4. Your W-4 drives the withholding in your paycheck. The higher the number of exemptions on your w-4 the less tax that is withheld. Some people however like to have a big tax return (like a no interest savings plan). So basically if someone claims zero they have the maximum withheld from their paycheck and a big refund at tax time. I'm not sure what the max is.

You fill out this form and supply it to your HR department. Anytime you take a new job you would fill out one of these, but you can change it when your at the same job as well. I changed mine when my kids were born because I like to get my money in my paycheck and not have to wait for Uncle Same to give me my money back.

PA...thank you kindly for providing that information.

I guess I go back to original question, can i legitamatly claim more than 1 if I dont necessarily have more than 1 to claim? Can I claim myself? Can I claim my younger sisters that live with me seasonally when they are out of school? Does the irs ever try to prove this?

Also, if anyone had any expierience with this can anyone give me a rough estimate of how much more i would get on my check if I claimed more? I currently get $3000 bi weekly and I am getting $1920 after taxes, insurance, and ira. What would do you think the estimate would be if i claimed 2, 3, 4, etc?

Thanks again...I am absolutely blessed that I found this site!

[HHM]

PA...thank you kindly for providing that information.

I guess I go back to original question, can i legitamatly claim more than 1 if I dont necessarily have more than 1 to claim? Can I claim myself? Can I claim my younger sisters that live with me seasonally when they are out of school? Does the irs ever try to prove this?

Also, if anyone had any expierience with this can anyone give me a rough estimate of how much more i would get on my check if I claimed more? I currently get $3000 bi weekly and I am getting $1920 after taxes, insurance, and ira. What would do you think the estimate would be if i claimed 2, 3, 4, etc?

Thanks again...I am absolutely blessed that I found this site!

YES

It is not a big deal, you can claim up to 9 or 10. (I forget what the max is).

When you took your job (assuming you are not being paid under-the-table, or a 1099 independant contractor), you would have filed out form W-4. On that form, on Line D, it asks you how many dependants you are claiming (note, on line A, you claim yourself, on Line C, you claim your spouse, and line D is for all others). I believe, the total you can claim, without proof is 10 (including yourself).

From the IRS perspective, it really does not matter how many dependents you claim, the IRS gets the same money from you. The W-4 only effects how much is withheld each month. Come tax time, you fill out your taxes as normal, but if you claimed more dependants, that means you simply paid less tax (during the year), thus you either get a smaller refund or end up owing the IRS.

[Cali]

IRS withholding calculator: http://www.irs.gov/individuals/page/0,,id=14806,00.html

[ltrain823]

IRS withholding calculator: http://www.irs.gov/individuals/page/0,,id=14806,00.html

Cali, thanks so much for that link. It says its not up for maintenance right now but I'm just curious to know...

If I own my home and mother and father live with me and I take care of them, can I be listed as head of houshold?If so how does one get listed for that?