Income tax questions answered by WalletPop experts
I just did my 2009 taxes, and I owe the Feds $10,000. I am a W-2 employee (making over $150,000) with maxed-out 401(k) contributions, IRAs, charity contributions and two mortgages to write off. What can I do this year to lower my AGI and tax bill for 2010?
Answer from Jennifer Lane, owner of Compass Planning Associates Inc. and author of The Complete Idiot's Guide to Protecting Your 401(k) and IRA
It sounds like your paycheck withholding might be too low. Increasing the amount your employer withholds from each paycheck won't save you taxes the way contributing to your 401(k) will, but it will help avoid the unpleasant surprise of a big bill come tax day. Check out the IRS' online withholding calculator at IRS.gov. You'll need a recent pay stub and your 2009 tax return to complete the worksheet. The withholding calculator will be especially helpful for employees affected by the Making Work Pay, the American Recovery and Reinvestment Act of 2009 or who have held more than one job this year. Those and other situations not covered on Form W-4, Employee's Withholding Allowance Certificate, might result in too much or too little payroll withholding.
In 2006, my son went to an attorney to see if interest on his student loan could be lowered. He, in turn, filed bankruptcy, Chapter 11, which he should not have, as student loans are not dischargeable. It went to the bankruptcy trustee, who herself said it should not have been filed, but she pursued the bankruptcy to the point where she attempted to sell his home. The case was dismissed by the bankruptcy court in late 2006, as there was no one to discharge to, as the only debt was student loans. The trustee lied to the court about the equity in the home, and collected $50,000 with the intention of paying it to the student loan. She did not and has this money for three years now and will not return it. She went so far as to file a complaint with the IRS on my son. They did a field investigation, and checked 2006 and 2007 returns and came up with a sum of $49,995 dollars in allowances not allowed in an attempt to take the money from the trustee, so she has someone to pay so she can collect the commission of 25%. Do we have any recourse against her and the IRS, since they were not a part of the bankruptcy?
Answer from Mark Britton, a lawyer and founder of Avvo.com, a free online legal directory
I am going to retire in 16 months at age 70. I will have about $100,000 in my 401(k) plan. How much will I have to pay in taxes? I live in Massachusetts.
Answer from Barbara Weltman of The J.K. Lasser Institute