Debt Dumpers 2020

[PhoenixStrength]

With all you folks claiming zero exemptions and getting a refund, maybe you can help me understand why my spouse and I (we file jointly) claim zero and still end up owing A LOT in taxes every year. In fact, we've had to pay a penalty for under-withholding. I know we can request additional withholding beyond the normal zero exemption calculations but seems weird to me that we would need to and I keep putting it off so will likely be paying the penalty again this year. We make decent income but not crazy high, and our income is solely from our wages. We also have a good chunk of it as non-taxed income (going directly into retirement plans and HSA). I don't get it!

Does your employer use ADP for payroll by chance? Only asking because in the past I've had 2 different employers who used ADP and at both of them I owed despite claiming zero and filing single. At the second one I noticed how little taxes were being taken out after my 2nd check and had my employer check with ADP, who claimed they were taking the right amount out, despite IRS W2 calculator confirming they were taking less than half what they should have been. I wound up using the option of requesting extra withholding since I was salary and knew what my check would be and could guarantee it would be the appropriate amount.

I don't honestly know if ADP really has an issue or not, but I do know the 2 employers that I had an issue with on taxes both used them.

 

[ruadisneyfan2]

I am just waiting on W2 form to be imported for my job now. My husband's is available today, mine won't be until next week or the week after. Really not in too much of a rush, because we can't e-file until Jan 27 anyway. I manually entered in my 1099-R info from my 2 banks, since they post interest paid to date online. I also manually entered in my Roth IRA withdrawal of contributions from earlier this year (no tax liability on that, but still have to submit form 8606).

We are set to get back approximately $800 between Fed and State so I want to file as soon as it's open.

We did alright this past billing cycle on expenses. On track to put $3500 into savings next month.

I'm anxiously awaiting the Ally Bucket feature to come online. I will be splitting my savings into 4 buckets: Emergency, Car loan payoff, Balance Transfer payoff, DL Annual Pass fund. Anyone know when this feature is set to debut?

No but they do allow multiple savings accounts. That works for me and each account allows 6 transfers per month. So if I pay my homeowners insurance, car insurance and pay charges from Christmas shopping, that counts as 1 withdrawal from each account, not 3 out of 1 account.
I have around 10 savings accounts with them (Christmas, Escrow, Car Ins, etc.) and it keeps me very organized. Anything that is not a monthly bill has its own savings account so it's 0 stress when the bill comes. YMMV

 

[WeatherLights]

Does your employer use ADP for payroll by chance? Only asking because in the past I've had 2 different employers who used ADP and at both of them I owed despite claiming zero and filing single. At the second one I noticed how little taxes were being taken out after my 2nd check and had my employer check with ADP, who claimed they were taking the right amount out, despite IRS W2 calculator confirming they were taking less than half what they should have been. I wound up using the option of requesting extra withholding since I was salary and knew what my check would be and could guarantee it would be the appropriate amount.

I don't honestly know if ADP really has an issue or not, but I do know the 2 employers that I had an issue with on taxes both used them.

Yes, they use ADP!

Have you tried claiming SINGLE and Zero?

That should do it.

I have no idea why you owe so much. What tax bracket do you end up in with your AGI?

We file jointly, claim 10 exemptions on my husband's W4 and 5 on mine from my part time job. We still get a refund every year. Our AGI puts us in the 22% tax bracket because a huge portion of our income is non taxable. We have 2 kids for the child tax credit but that's all we are eligible for. We take the standard deduction.

Have you tried using the IRS W2 calculator to see if your tax liability is matching up to how much is being taken out of your checks? The payroll department at your work could be screwing something up. You can use the tax tables to see how much should be withheld and make sure it matches up.

Thanks, DLgal. I looked at the items you mentioned and I'm going to have to grab a pay statement and set aside a block of time to figure this out. I'm pretty sure now that the auto withholding is just wrong and I'll need my employer to correct it. Which is embarrassing because it's been like this for many years and I've just ignored it. Ugh.

 

[ruadisneyfan2]

For the snowball, no. I use a google sheet for my actual budget though. I'm just saving up money in a savings account until I have enough to pay on the phone, that should take maybe until March

That's just not close to realistic for us. We live with my wife's mother right now and even with that we couldn't save that much of our income. I don't understand how people's expenses could possibly be so low with bills and loan payments. Maybe they were lucky enough not to have student loans.

Yes, he didn't have student loans but if you read his blog you will see how it's more a matter of mindset. All spending takes away from money that could be invested. So $20 for ordering a pizza every other week on pay day is not just $40 per month lost but that $40 plus its potential for compounded interest over several years. He is good with calculating this and it enters his mind for all spending decisions. Not just larger purchases like a car, but every little thing too.

 

[DLgal]

No but they do allow multiple savings accounts. That works for me and each account allows 6 transfers per month. So if I pay my homeowners insurance, car insurance and pay charges from Christmas shopping, that counts as 1 withdrawal from each account, not 3 out of 1 account.
I have around 10 savings accounts with them (Christmas, Escrow, Car Ins, etc.) and it keeps me very organized. Anything that is not a monthly bill has its own savings account so it's 0 stress when the bill comes. YMMV

I don't like the multiple accounts feature at all. I had that back when I had an old ING direct savings account. For me, it was a pain. I want one account to transfer in and out of but divisions (virtual) within that account, which is a feature Ally is supposed to roll out this month.

For now, I have my "buckets" set up in excel alongside my monthly bills register.

 

[WeatherLights]

I don't like the multiple accounts feature at all. I had that back when I had an old ING direct savings account. For me, it was a pain. I want one account to transfer in and out of but divisions (virtual) within that account, which is a feature Ally is supposed to roll out this month.

For now, I have my "buckets" set up in excel alongside my monthly bills register.

This is a feature I, too, wish my banks had!

 

[RamblingMad]

This is a feature I, too, wish my banks had!

How does this help?

 

[barkley]

Yes, he didn't have student loans but if you read his blog you will see how it's more a matter of mindset. All spending takes away from money that could be invested. So $20 for ordering a pizza every other week on pay day is not just $40 per month lost but that $40 plus its potential for compounded interest over several years. He is good with calculating this and it enters his mind for all spending decisions. Not just larger purchases like a car, but every little thing too.

this reminds me of my raised in the depression era parent's repeatedly teaching us 'watch the pennies and the dollars will take care of themselves'. no matter how large or small a purchase was-it was given the same consideration. the cost of a pizza that lasts a single meal could be used for a roast that lasts several nights with the savings going to-savings.

now i can't honestly say that i apply this principle to everything i purchase but it will keep me from succumbing to much in the way of dining out or starbucks type purchases because those seem to be the easiest thing to eliminate and free up money for other purposes.

 

[StacyStrong]

How does this help?

Organization, with less of chance of simple user error.

 

[barkley]

Organization, with less of chance of simple user error.

so is it basicly one physical account but there's a feature that lets you look at it broken into budgeted categories? like-the account balance is $1000 but you can view it as multiple named categories with different balances that add up to the real accounts $1000?

 

[WeatherLights]

so is it basicly one physical account but there's a feature that lets you look at it broken into budgeted categories? like-the account balance is $1000 but you can view it as multiple named categories with different balances that add up to the real accounts $1000?

Yes, exactly that! It would give a nice visualization right there in the account, rather than keeping the budgeted categories in my head or on a separate spreadsheet.

 

[RamblingMad]

Organization, with less of chance of simple user error.

Still trying to get my head around this. I pay my credit card off each month with my checking. My credit card covers food and gas mostly. Anything else is do to stuff breaking and needing replacement. For example, I needed to replace my printer since I didn't move it with me, and I expect to replace my water heater soon. My utilities and mortgage payment come of out of my checking. For savings, I transfer excess to my investment account. Then, it's just a question as to how to allocate it, which is really the hard part for me. I don't get how splitting my checking into virtual accounts would help me save more. How does this work for you?

 

[DLgal]

Still trying to get my head around this. I pay my credit card off each month with my checking. My credit card covers food and gas mostly. Anything else is do to stuff breaking and needing replacement. For example, I needed to replace my printer since I didn't move it with me, and I expect to replace my water heater soon. My utilities and mortgage payment come of out of my checking. For savings, I transfer excess to my investment account. Then, it's just a question as to how to allocate it, which is really the hard part for me. I don't get how splitting my checking into virtual accounts would help me save more. How does this work for you?

It's a feature of SAVINGS accounts, not checking accounts.

For me, I have several SAVINGS goals. I have a separate checking account and "short term" (like, $1000 emergency fund) savings with one bank. That is my primary bank.

My LONG TERM savings is at Ally bank. I have 4 savings goals for the year. All my excess money goes into that account at the end of every month. But, I'd like to divide up the money being saved so that a certain percentage goes to each savings goal.

Our investment accounts are completely separate entities and that money is auto debited out of our checking account every month and transferred to thoose.

 

[WeatherLights]

It's a feature of SAVINGS accounts, not checking accounts.

For me, I have several SAVINGS goals. I have a separate checking account and "short term" (like, $1000 emergency fund) savings with one bank. That is my primary bank.

My LONG TERM savings is at Ally bank. I have 4 savings goals for the year. All my excess money goes into that account at the end of every month. But, I'd like to divide up the money being saved so that a certain percentage goes to each savings goal.

Our investment accounts are completely separate entities and that money is auto debited out of our checking account every month and transferred to thoose.

Yeah, that's what I had in mind. I'd like to have it as a feature in my savings account. For example, a "new car" category, a "replace appliances" category, an "assist family" category, etc. It would be less helpful in a checking account being used for regular bills, as you'd have to be constantly updating it to keep up!

 

[RamblingMad]

It's a feature of SAVINGS accounts, not checking accounts.

For me, I have several SAVINGS goals. I have a separate checking account and "short term" (like, $1000 emergency fund) savings with one bank. That is my primary bank.

My LONG TERM savings is at Ally bank. I have 4 savings goals for the year. All my excess money goes into that account at the end of every month. But, I'd like to divide up the money being saved so that a certain percentage goes to each savings goal.

Our investment accounts are completely separate entities and that money is auto debited out of our checking account every month and transferred to thoose.

I don't have a savings account. If I need to save short term, I'll buy 1-3 month US Treasury Bills or CDs in my investment account. Held to maturity, both are risk free. Of course, if you're going to breach the $250k FDIC cap, then the Treasury Bills make more sense. Both pay higher yields than I'm finding in savings accounts. I keep $10k for my emergency fund in my checking.

How do I think about multiple savings goals?

 

[DLgal]

I don't have a savings account. If I need to save short term, I'll buy 1-3 month US Treasury Bills or CDs in my investment account. Held to maturity, both are risk free. Of course, if you're going to breach the $250k FDIC cap, then the Treasury Bills make more sense. Both pay higher yields than I'm finding in savings accounts. I keep $10k for my emergency fund in my checking.

How do I think about multiple savings goals?

If you have $10k in your checking account, you are missing out on interest you could be earning in a high yield savings account. Ally offers 1.6% interest, while your checking account probably offers zero. You might as well park that $10k somewhere where it can earn at least a little money, while being completely accessible should you need it. Ally savings accounts are free and FDIC insured. No reason not to have one. I'm not finding any bank 1-3 month CD rates or Treasury Bill rates that beat Ally by enough to justify using those, with the restrictions on them.

 

[RamblingMad]

If you have $10k in your checking account, you are missing out on interest you could be earning in a high yield savings account. Ally offers 1.6% interest, while your checking account probably offers zero. You might as well park that $10k somewhere where it can earn at least a little money, while being completely accessible should you need it. Ally savings accounts are free and FDIC insured. No reason not to have one. I'm not finding any bank 1-3 month CD rates or Treasury Bill rates that beat Ally by enough to justify using those, with the restrictions on them.

Is there a minimum balance required?

 

[jen7233]

Still trying to get my head around this. I pay my credit card off each month with my checking. My credit card covers food and gas mostly. Anything else is do to stuff breaking and needing replacement. For example, I needed to replace my printer since I didn't move it with me, and I expect to replace my water heater soon. My utilities and mortgage payment come of out of my checking. For savings, I transfer excess to my investment account. Then, it's just a question as to how to allocate it, which is really the hard part for me. I don't get how splitting my checking into virtual accounts would help me save more. How does this work for you?

It's not a checking, but savings account, that most are discussing about that type of account for short, or in some cases, longer term goals. So, not necessarily that the result is to save more, but to allocate monthly towards those goals, with benefit of the interest in the savings account rather than be in checking with either no or low interest. The separate accounts or sub accounts if you will in this particular talk on Ally, is also for visually seeing where one is at meeting their goal. With these separate goals being consolidated under one account, there's benefit of having just the one account and still visually seeing where one is, and the interest.

 

[barkley]

It's a feature of SAVINGS accounts, not checking accounts.

For me, I have several SAVINGS goals. I have a separate checking account and "short term" (like, $1000 emergency fund) savings with one bank. That is my primary bank.

My LONG TERM savings is at Ally bank. I have 4 savings goals for the year. All my excess money goes into that account at the end of every month. But, I'd like to divide up the money being saved so that a certain percentage goes to each savings goal.

Our investment accounts are completely separate entities and that money is auto debited out of our checking account every month and transferred to thoose.

with the virtual aspect-when you make a withdrawal or transfer from the (for lack of a better term) 'base account' can you make a notation in the individual virtual of what the transfer was for, and then at a later date do a printout on each of the virtuals?

i ask b/c i use the same principle but w/ individual separate accounts-

income gets direct deposited to checking,
checking has set transfer dates to individual accounts (xmas, short-term savings, long term savings, and a 'reserve' which is 1/12th of my annual expenses for property taxes, insurances paid annually/bi-annually, lawn/pest service, hvac service contract, yearly propane, sirius renewal, car registration). checking is used to pay utilities and household expenses (though i use the same credit unions credit card to pay most for the points then transfer the amount from checking at the end of the month). the only manual transfer i have is at the beginning of the month if i have anything leftover from the household budget for the prior month it goes into a separate 'household rollover' account for those months i have additional expenses. if i need to transfer something from one of those individual accounts i can note it in the transfer details so periodically i can pull up the history of say 'reserve' and see what it's been spent on so far/if an expense has increased such that i need to tweak the budget.

if the virtual allowed this kind of detail i could see the advantage to it, esp. if the banking institution has tiered savings such that maintaining a higher single balance resulted in higher interest (though interest these days is pitiful).

 

[StacyStrong]

Is there a minimum balance required?

No. At least not for my Amex savings account which is similar to Ally.