It’s been a long time coming, but after eight months of drama, frustration, and a heck of a lot of patience, Girl Ninja finally got to sign a teaching contract for the 2010-2011 school year. Is it pretty stupid that she didn’t get her contract until the second to last month of the school year? YES, but at the end of the day a contract is a contract, it doesn’t matter if it comes on the first day of school or the last. We recently received a lump sum back-payment from the school district which brought her YTD salary in line with regular teacher rates. The check was a huge blessing and a very important reminder, a reminder that although taxes are important, they suck… bad.
The $10,000 gross pay she received had $2,800 in taxes taken out of it. Now I’m not a tax guy, but I knew there was no way we were in the 28% tax bracket (according to my estimated taxes). Why the heck would the school district take so much out? I still don’t know the answer to that question, but I’m sure glad they did.
At first, I was convinced we’d be seeing about $1,000 of that $2,800 back in form of a tax refund. That would make sense seeing that our marginal tax rate is roughly 18%. After a lot of number crunching, I discovered Girl Ninja and I were unknowingly setting ourselves up for a a rough tax season next April.
I was on track to pay about $7,500 in federal taxes this year. Girl Ninja, prior to the lump sum payment, would have paid about $2,500, for a total joint payment of around $10,000. I then went to the IRS’s website and ran some numbers to see what our estimated tax obligation would be this year. The result was surprising…$14,431.
Holy Guacamole, we would have unknowingly owed about $4,000! But since Girl Ninja’s retroactive pay added $2,800 to our tax payments, we’d now only end up being $1,200 behind. In an attempt to owe (and be owed) nothing next tax season, I submitted a new W-4 to my employer so an extra $150/month was taken out of my paycheck.
Had Girl Ninja not received that lump sum payment, I never would have thought to check our 2011 estimated tax obligation, which means I would not have realized we were underpaying our taxes until it was too late! Have you ever been blindsided by your taxes? Ever owed way more than you thought (or got back way more than you expected)? Have you checked your 2011 estimated tax obligations to make sure your payments are on track?