Personal Finance?
Jayanti Patel asked:
My CPA informs me that my spouse & I will have to pay $4,800 this year for personal taxes, even though, we made a part contribution during the year. If we deposit $10,000 into a IRA a/c, we will still have to pay $2900 to IRS. Why is that? Our gross income under $50,000.00!!!
My CPA informs me that my spouse & I will have to pay $4,800 this year for personal taxes, even though, we made a part contribution during the year. If we deposit $10,000 into a IRA a/c, we will still have to pay $2900 to IRS. Why is that? Our gross income under $50,000.00!!!
Also we have $10,000 in cash from car, garage sales. Where can we invest this money with gurantee, no risk investment?
Max
March 7th, 2009 at 7:50 pm
When you say part contribution, do you mean money put into IRA? The safest investment would be to open up an IRA as fixed cd. There is nothing more safe then that.
On 50K, the tax amount of 4800 sounds right.
March 9th, 2009 at 3:31 am
Something sounds fishy.
If your gross income is in the $50K range, your tax bracket will be in the 20% range. Which means that you tax liability will be around $10K. If you paid through withholding and partial payments $5200, then your liability is about right.
Now, as to deposits into IRA, there is a limit as to how much you can claim as a deduction. It is something like $4000 per couple, $2000 single, you could look that up in the 1040 instruction book. So, if you deposit your $10K into an IRA, you can only deduct $4000 of it. So, the change from $4800 to $2900 is about right.
My question is how much was withheld from your paychecks during the year? I would recommend evaluating your W-4 withholdings and making changes so that next year you do not have such a shock.