Early 2012 tax filing checkup

Does anybody else do this? I know that I usually start roughly a month before the end of the year so that I can adjust it a little to make sure that I owe nothing because I keep my W-4 filing very tight due to the fact that we still have 4 child tax credits that we can take advantage of.

How did we do it? Simply by using all the existing tax benefits that are in the sometimes “convoluted” IRS code.

  1. “Cafeteria Plan” for medical/dental/vision plans via pre-tax pay (almost $4,000/yr)
  2. Flexible Spending Account to help cover out of pocket medical expenses, also pre-tax but not saving the maximum since it would be lost if not spent at the end of the year (about $1,000/yr)
  3. 401k contributions of 10% or more (about $10,000/yr)
  4. Mortgage interest deduction write-off (about $10,000/yr)
  5. Living in a high property tax state, obviously we help make up for not paying income taxes here (about $10,000/yr)
  6. $3,800 x 6 which is the personal deduction amount multiplied by the number of eligible exemptions ($22,800/yr)
  7. Enough eligible children all under the age of 17 to take advantage of the child tax credit ($1,000/child)

As you can see, the above deductions total about $57,800 which is a substantial tax write-off. So, take the household income (say $100,000 for a nice round figure), and subtract those write-offs. $100,000 – $57,800 = $42,200. At 10% tax rate, that’s $4,220 income tax. BUT now we subtract the child tax credits off, $4,220 – $4,000 = $220. That’s a Federal income tax of $220 on an income of $100k … or 0.22%. Yes you read that correctly, less than 1% on a six figure income.

Now keep in mind that we don’t take advantage of Long Term Capital Gains tax, but that is obviously another avenue that we may visit in the future.

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2 Responses to Early 2012 tax filing checkup

  1. Galina says:

    Sorry Prateek do not have the letter now but it was a plain and smlipe letter quoting my chalan number and ITR form number(i guess). I just wrote that by mistake I selected wrong assessment year and please rectify it.HTHCan you please share what you wrote to the Assessing Officer and what all documents did you send as a supporting?

  2. Lorna says:

    Hi,First of all thanks for inriomatfon. Same mistake I made too today. I visited IT office and met one guy (Anil Chhabra )but he refused to do so saying he cannot have this option and directed me to visit bank to do modification. Anyhow after reading this blog I got confidence that something can happen. Can you please share the assessing officer name because my ward is of gurgaon.ThanksDhirendra

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