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Should my tax return be higher this year? W2 income over $125k in NY seems like low refund
So I'm a bit confused about my taxes this year. I live in New York State and my W2 shows an income of $169,021.24. This is my first year earning six figures and I was expecting a bigger refund than what I'm seeing when I started doing my taxes. I've been using the same tax software I always do, and last year when I made around $90k I got back almost $3,200. This year with the higher salary I'm only getting about $1,700 back according to the preliminary calculation. I thought with more withholding I'd get more back, not less? My withholding on the W2 seems high - federal tax withheld is $37,814 and state tax is $10,651. I didn't change my W4 when I got the raise mid-year, so I'm still claiming 1 allowance. I'm single, no kids, standard deduction, nothing fancy. Am I missing something here? Did I mess up my withholding? Or is this normal that higher income actually means smaller refunds? I always thought more income = bigger refund. Sorry if this is a dumb question but I'm genuinely confused.
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Just found out I can't pay myself a salary in my single-member LLC - how to resolve this mess?
So I opened a small retail shop last year and hired two part-time employees. I put myself on payroll through ADP because we got a better promotional rate if we had three people on the books. I only started paying myself in December and it's a tiny amount (about $530 total). Today my accountant dropped the bomb that as a single-member LLC, I'm not supposed to be on my own payroll and receive a W2! Now I have a W2 I shouldn't have, and my business payroll write-offs are going to be messy. I have three main questions: 1. If I add another member to my LLC, can I legally keep myself on payroll going forward? 2. If that doesn't work, can I put my husband on payroll instead? We file our taxes jointly, so I'm not sure if that creates the same problem. 3. How do I correctly file taxes for the money I already paid myself through payroll? I'm honestly not trying to game any system (except maybe keeping ADP's promotion rate lol), I just want to fix this properly. Any advice would be super appreciated!
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You might want to consider converting your LLC to an S-corporation instead of adding a member. As an S-corp owner, you're required to pay yourself a "reasonable salary" that's subject to payroll taxes, and then you can take additional profits as distributions that aren't subject to self-employment tax. It's a bit more paperwork and you need to file Form 2553 to elect S-corp status, but many small business owners save on taxes this way. Just make sure your salary is reasonable for your industry and role to avoid IRS scrutiny.
I've heard about the S-corp option but wasn't sure if it made sense for a small business like mine. Is there a certain income threshold where it becomes worth the extra hassle and paperwork? And would this help me fix my current situation with the incorrect W2?
S-corps generally start making financial sense once your business profit is around $40,000-$50,000 annually, though this varies by industry. Below that, the savings on self-employment tax often don't outweigh the additional costs (filing separate returns, payroll processing, possibly higher accountant fees). For your current W2 situation, converting to an S-corp now wouldn't retroactively fix the issue. You'd still need to correct the reporting for 2024. However, it would provide a clean path forward for properly paying yourself starting this year. The ideal approach is to fix the past issue separately (either by amending returns or following your accountant's guidance) while setting up the proper structure for the future.
If you're making so little from the business, why even worry about being on payroll? Couldn't you just take owner's draws when needed and report everything on your Schedule C? That's what I do with my LLC and it's way simpler than dealing with payroll.
This is exactly what I do too. I have a real estate LLC and I just take draws when I need money. Pay quarterly estimated taxes and then report everything on Schedule C at tax time. No need for the whole payroll hassle unless you're making serious money.
I only did payroll to get ADP's promotional rate - they had a deal where we got a big discount if we had at least 3 people on payroll. Since I had 2 actual employees, I added myself as the third to save money. I'm fine just taking draws going forward, but now I'm stuck with this incorrect W2 situation for 2024 that I need to fix. Still learning all the LLC tax stuff as I go!
Do resale certificates apply to both buying AND selling? Confused about purchasing exemptions
I'm trying to wrap my head around how exactly resale certificates work. I get that they're important for SELLING goods, but what about when you're just PURCHASING? From what I understand, don't you need to present a resale certificate to the seller to avoid paying sales tax at the time of purchase? So if my business only purchases products from within the US but doesn't actually SELL anything within the US (we export everything), would we still need a resale certificate to avoid paying sales tax when we buy our inventory? Am I understanding this correctly? The whole sales tax thing is confusing me and I want to make sure I'm following the right procedures for my business. Thanks for any help!
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Quick tip from someone who's been audited for sales tax issues - keep REALLY good records of your resale certificate usage. When you buy stuff tax-free using your resale certificate, make sure you can prove that those exact items were either: 1) Resold to customers (with sales records) 2) Incorporated into products you later sold 3) Exported out of state/country The auditor made me provide documentation for a sample of purchases going back 3 years! If you can't prove the items were resold or exported, they'll assess sales tax plus penalties and interest.
Thanks for this advice. What kind of documentation did they specifically want to see during your audit? Just invoices or something more detailed? I'm worried because I'm not sure we've been tracking things that carefully.
One thing nobody's mentioned yet - in most states, misusing a resale certificate is actually a criminal offense! If you use it to buy things tax-free that you don't intend to resell, you could face penalties. I had a friend who bought office furniture using their resale certificate (thinking all business purchases qualified) and got hit with a huge penalty plus interest during an audit.
This is so true! My brother-in-law used his resale certificate to buy a TV for his "office" and got caught in an audit. Ended up paying the tax plus a 25% penalty! Not worth the risk.
Is getting a big tax refund actually good for your finances?
So I got a much larger tax refund than expected this year - almost $3,800! At first I was super excited (free money, right?!) but then my brother-in-law made this comment about how I'm "just giving the government an interest-free loan" and now I'm confused. I've always thought getting a refund was a good thing - like I'm winning somehow? But now I'm wondering if I should adjust my withholdings so I get less back next year. My situation is pretty straightforward - single, one W-2 job making about $68K, standard deduction, no dependents or anything complicated. Is there actually a "right" approach here? Should I be aiming for a smaller refund or even owing a little at tax time? Or is it okay to keep getting these larger refunds as a sort of forced savings? What do you all think is the smartest financial move regarding tax refunds?
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I'm honestly confused about all this withholding adjustment talk. Can someone explain exactly HOW to adjust your withholdings? Do I just go to HR and say "withhold less please" or is there a specific form or something?
You need to submit a new W-4 form to your employer. It's fairly straightforward: 1. You can get the form from your HR department or download it from irs.gov 2. The current W-4 doesn't use "allowances" anymore - instead you directly enter dollar amounts 3. If you want less withheld (bigger paychecks, smaller refund), you'd use Line 4(b) to list deductions or use the worksheet to calculate an additional withholding amount Most payroll systems also have an online tool where you can update your W-4 electronically without filling out the paper form.
Thank you, that makes sense! I had no idea it was called a W-4, I was looking for some kind of "withholding adjustment request" or something. Will definitely talk to our HR person tomorrow.
This might sound odd, but I intentionally set up my withholdings to get a big refund as a way to protect myself from my spending habits AND my ex. We have a complicated custody arrangement, and I'm worried that if I had more in each paycheck, he'd somehow try to argue for more child support. The tax refund comes after our annual review, so it doesn't factor into the calculations. Plus I use it for a family vacation each summer that creates important memories for my kids.
Not odd at all - I've heard financial advisors call this "defensive financial planning." Sometimes the mathematically optimal choice isn't the best one when you factor in real-world complications. As long as you're making an informed choice rather than just defaulting into it, I think that's totally reasonable.
What are some of the best tax planning strategies for 2025?
Hey all, getting a head start on next year's taxes since I got absolutely hammered this past filing season. I'm a contractor for a tech company and I'm trying to figure out how to minimize what I'm going to owe next April. My spouse and I both earn decent incomes (around $145k combined) but we're really trying to pay less in taxes next year. I found this image from an old tax planning webinar that listed some strategies, but I'm not sure which ones would work best for our situation. Anyone have suggestions for the best tax planning strategies that actually work? I've heard about things like maximizing retirement accounts and bunching deductions but don't fully understand how to implement them effectively. Any practical advice would be super appreciated!
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Has anyone tried bunching their itemized deductions? I'm thinking about doubling up on charitable donations every other year to get over the standard deduction threshold.
Yes! We did this last year and it worked great. Donated to our usual charities plus prepaid some planned donations for this year. Itemized last year and will take standard deduction this year. Saved about $2,300 in taxes by concentrating deductions in one year instead of spreading them out.
Don't forget to look into health savings accounts if you have a high-deductible health plan! Triple tax advantage - tax-deductible contributions, tax-free growth, and tax-free withdrawals for medical expenses. One of the few true tax freebies out there.
That's a good point! Do you know if I can open an HSA myself as a contractor? My health insurance is a high-deductible plan but it's not through an employer since I'm self-employed.
Absolutely you can! That's actually one of the great things about HSAs - you don't need an employer to open one. As a self-employed person with a qualifying high-deductible health plan (HDHP), you can open an HSA through many banks, investment companies like Fidelity or Vanguard, or specialized HSA providers. Just make sure your health plan qualifies as an HDHP under IRS guidelines. For 2025, that means a minimum deductible of $1,600 for individual coverage or $3,200 for family coverage. The maximum 2025 contribution is $4,150 for individual coverage or $8,300 for family coverage, with an extra $1,000 catch-up contribution if you're 55 or older.
Lucas Turner
This might be a weird question, but does anyone know how to actually calculate the right withholding amount? Like is there a formula? My accountant just says "claim 0 if you want a refund, claim more if you don't" but that seems super simplistic.
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Kai Rivera
It's actually pretty complicated. The 2020 W4 form eliminated allowances entirely. Now it's about additional income, tax credits, and extra withholding. The IRS has a Tax Withholding Estimator tool on their website that walks through your full tax situation and calculates the right W4 settings. I'd start there - it's much better than the "claim 0" oversimplification.
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Anna Stewart
Just want to point out that your tax RETURN is the form you file. Your tax REFUND is the money you get back. Sorry to be that person, but the terminology confusion makes tax discussions so much harder!
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Benjamin Johnson
AuthorOmg you're right! Can't believe I've been saying that wrong all these years. Thanks for the correction - guess I'm learning all kinds of tax stuff today!
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