Federal Allowances

[mojo89]

Advised by Financial Planner (for 2013) to increase Federal Withholding Allowances to 10, for both myself and wife. We file Married Joint. It was explained to use that 1 Allowance = $500 less in tax return money. In years past, we received large tax refunds, so the intent of this advice was to "cut that amount in half", realize the extra money in our bi-weekly paychecks and then get a smaller tax return.

Well, I did taxes and it turns out that instead of getting a return, we'd actually OWE thousands of dollars in federal taxes. I am taking taxes to a tax preparer to confirm this.

Do we have any recourse against the Financial Planner for this tax advice? I'm sure I know the answer, but wanted to put it out there.

Appreciate the input.

[autoxer]

You can call up your former 'financial planner' and yell at them, but ultimately it is your responsibility. You can't just assume that 1 allowance = $500, there are too many factors (tax bracket, filing status, dependents, itemized deductions). You probably had to give your employer a W-4 to make the change, and it has the calculations for withholding. You have to do some math to get it close.

The intent of the advice was very good, it was just too generalized. Do the math with an online paycheck calculator and get it right going forward. After you make a change, don't just assume it is right, grab your adjust paystub and a calculator, and double check that a proper amount is being withheld.

[HappySaver]

It also assumes your tax scenario hasn't changed from last year.

We just received a large refund due to increased itemized deductions (larger mortgage and re taxes with new house). Just changed our exemptions to 10. Will keep a close eye, not just how much gets withheld, but on making sure nothing changes dramatically throughout the year (income, deductions, etc.)

This has been on my mind this week, so thanks for the warning. Sorry this happened to you.