I had the same issue until I realized the new W-4 doesn't use allowances anymore. You have to put actual dollar amounts for additional income and deductions. I put $200 extra on Line 4(c) for additional withholding and finally got close to breaking even last year.

Same here! My $2,700 refund this year went straight to a down payment fund that I've been trying to build for 2 years. Something about that lump sum makes it easier to put toward a big goal instead of watching it disappear $225 a month.

I guess that makes sense if you know you won't save it otherwise. I just hate the feeling that I'm giving away my money for months when it could be working for me. Different strokes I guess!

I hadn't even thought about state taxes - we're in Washington state. Do different states have their own separate estate tax systems? Is there a way to look this up?

Yes, Washington state definitely has its own estate tax, and the exemption amount is much lower than the federal one - around $2.2 million last I checked. This is exactly the kind of situation where your uncle needs good planning! Washington's estate tax rates are progressive, ranging from about 10% to 20% for larger estates. There are some planning strategies that work specifically for Washington state taxes. You can find the basics on the Washington Department of Revenue website, but this is absolutely something your uncle's estate attorney should be addressing specifically.

Being a trustee doesn't generally create personal tax implications for you. The trust is its own tax entity with its own tax ID number. As trustee, you'll be responsible for ensuring the trust tax returns are filed, but you don't report trust income on your personal return unless you're also a beneficiary receiving distributions.

Wait that's insane! So if I negotiate with my credit card company to settle a debt for less than I owe, I'd have to pay taxes on the amount they forgive? How would that even work with the timing? Like would I get a tax form the next year?

Exactly! The credit card company would send you a 1099-C form (Cancellation of Debt) in January/February of the following year showing the amount of debt that was forgiven, and you'd have to report that as income on your tax return. For example, if you settled a $15,000 debt for $10,000, you'd receive a 1099-C showing $5,000 of cancelled debt, which would be added to your taxable income. The timing can be especially brutal because by the time you get the form, you might have already spent that "savings" or not budgeted for the additional tax liability.

Your friend is partially right but for the wrong reason. The withholding calculations can be different between bi-weekly and monthly payrolls, but your actual tax liability at the end of the year is exactly the same regardless of pay frequency. What happens is that bi-weekly receives 26 paychecks per year (which equals 52 weeks), while monthly receives 12. The withholding tables sometimes calculate slightly differently, which can result in slightly different amounts being withheld. But when you file your actual tax return, it's based on your total annual income, not how frequently you received it.

Thanks for breaking it down like this! I definitely meet all those tests. I live at home, mom pays for most everything, and I'm 16. I'm pretty sure I checked the right box on my return, but is there any way to double-check or fix it if I didn't?

You can double-check by looking at a copy of your filed return - it's on the first page of Form 1040. If you filed electronically, you should be able to log back into the tax software you used and view your completed return. If you did make a mistake and didn't check that box, you can file an amended return (Form 1040-X) to correct it. But honestly, even if you messed that up, it doesn't prevent your mom from claiming you - it might just cause the IRS to send a notice asking for clarification. The actual eligibility for being claimed as a dependent is what matters, not whether you checked the box correctly.

Our family tax guy says that the only time this becomes an issue is if the kid claims themselves as a dependent on their OWN return. Did your daughter have to specifically mark something on her return to show she was a dependent?

Thank you for bringing this up! They don't have long-term care insurance unfortunately. They looked into Medicaid but were told they have too many assets to qualify right now. They're spending down their retirement savings at an alarming rate with these nursing home bills. Do you know if the medical expense deduction applies to withdrawals from retirement accounts that are used to pay for the nursing home?

Yes, you can still claim the medical expense deduction even if the money comes from retirement account withdrawals. The source of the funds doesn't affect the deductibility of the medical expense. However, be aware that withdrawals from traditional retirement accounts (like a traditional IRA or 401k) are generally taxable income, which will increase your AGI. This could potentially reduce the benefit of the medical expense deduction since you can only deduct expenses that exceed 7.5% of your AGI. It creates a bit of a circular problem - you withdraw money to pay medical bills, which increases your income, which raises the threshold for deducting those same medical bills.

Is there a good way to track all this? I've been keeping receipts in a shoebox but it's getting overwhelming.