Tax help--US

[mr. beaumont]

Taking a stab at it that there's someone in a similar situation as me out there...

I am married, my wife and I both hold down regular jobs in which we pay taxes, but i also teach guitar lessons on the side at a small studio and have to file a 1099MISC.

I had a very good year in the lesson dept, and I'm looking at a pretty big tax bill, and for the first time (in years past my secondary income has made us end up with a small return, but never a bill!) If anyone else has a similar situation to me, I ask this:

Does it benefit you to file seperately from your wife?

Understanding that both can itemize if filing seperately, can mortgage interest and property taxes be divided down the middle?

I'm trying this question here as well as some tax forums, but I figured maybe someone would actually be in the same boat as me here.

[JohnW400]

The rate for maried filling seperatley is higher.

You're recently married if I remember correctly so if you and the Mrs. didn't change your status on your W9 then both your employers continued to take taxes out at the higher single rate. That might help you out because now you can claim married filing jointly and the tax rate is lower. However you'll still have the "marriage" penalty. That were your combined income takes a bit of a hit because it's more money.

The best advice I can give you is go to a reliable tax guy.

[tonedeaf]

If the problem is the "bill" at the end of the any given year (as opposed to trying to figure out how to pay/lower this year's "bill"), there are two options:

1. Increase your withholding (claim fewer or 0 exemptions or have an additional specific amount withheld each pay period). It is a simple matter of filing a new W4.

2. A more flexible way (and the way I manage my side business) is to make quarterly payments. If you did well in a quarter, make a payment to cover the income. Use your "marginal" rate, or highest rate of taxation, to calculate how much you need to pay. If you had a bad quarter, skip the payment.

Just in case you are not aware of this bit of bad news: If you under withold you are likely liable for underpayment penalties as well as the tax obligation.

Good luck.

BTW: The tax schedules have been adjusted to reduce the marriage penalty and I don't think it amounts to much any more. For example, a single person goes to the 25% rate at $33,900 and a filing jointly couple go to the 25% rate at $67,900.

[mr. beaumont]

Originally Posted by tonedeaf

1. Increase your withholding (claim fewer or 0 exemptions or have an additional specific amount withheld each pay period). It is a simple matter of filing a new W4.

2. A more flexible way (and the way I manage my side business) is to make quarterly payments. If you did well in a quarter, make a payment to cover the income. Use your "marginal" rate, or highest rate of taxation, to calculate how much you need to pay. If you had a bad quarter, skip the payment.
.

yep, I'll need to take one of those routes...actually, i planned on doing it last year, and never bothered...got lazy, so now it'll cost me!

i'm gonna sit down with turbo tax and just see what things come out as if we were to file seperately...because it's all me that's holding us back.

thanks for the help, all.

[Goofsus4]

Turbo Tax makes it easy to just run it both ways - married and separate. In my experience, it's pretty rare that you'll ever come out better filing separately, though.

I feel your pain. I have to do this every year too, and I just make one lump sum payment for the year (my other income is investment oriented and is more predictable) in advance. The first time I did that it totally sucked because I basically had to pay double for that year - my underpaid current year taxes and then my advance payment for estimated next year taxes. But now that I'm caught up, I just basically pay the estimated each year plus or minus some small adjustments.

[JohnW400]

By the way, since you use a guitar to teach with you can probably deduct things like strings , music ect and depreciate the guitar. I did this the first year that I got the 1099MISC (back in 1976).