Lost and confuse

[Yellow mellow]

So I m gonna admit that finance is not my thing but I'm learning. My first job out of residency pays 195000 so I thought take home should be around 11G or so. Although I'm married, I was told to claim 0 to avoid owing money when filing next year. What is shocking is my monthly check is only around 8800/month . Am I missing something here? I won't be able to save any money because my loan repayment and where I'm living along with other expenses will leave me living like a resident... Maybe worst. Please any guidance would help. Thanks

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[krl7044]

So I m gonna admit that finance is not my thing but I'm learning. My first job out of residency pays 195000 so I thought take home should be around 11G or so. Although I'm married, I was told to claim 0 to avoid owing money when filing next year. What is shocking is my monthly check is only around 8800/month . Am I missing something here? I won't be able to save any money because my loan repayment and where I'm living along with other expenses will leave me living like a resident... Maybe worst. Please any guidance would help. Thanks

Well, if you make $195k, this is what you'll end up with. Try this:
http://www.bankrate.com/calculators/tax-planning/payroll-tax-deductions-calculator.aspx
http://www.bankrate.com/calculators/tax-planning/payroll-tax-deductions-calculator.aspx

There are a several things you can do:
1) Find a good accountant who can offer you advice on minimizing your taxes, which can potentially get you some of your money back.
2) Contribute to a retirement plan. This might not be an option until you pay out your loans - you can at least contribute to a backdoor Roth IRA.
3) Decrease your loan payments by consolidating/refinancing your loan.
4) Live like a resident until the loans are paid off (that goes without saying).

If you put all of this together, I guarantee that you can decrease your tax liability and pay out your loans quicker.

 

[QofQuimica]

It definitely matters where you live. If you're somewhere that has state and/or local income tax, for example, that can eat up a hefty piece of your paycheck. Don't forget about SS and Medicare too.

Concerning what to do, we can't make specific suggestions without knowing what you're spending your money on, and maybe you aren't sure yourself. In that case, start by keeping track of what you are spending your money on for a month or two. But in general, you have two basic options: increase income or decrease expenses. Can you moonlight at all, or can your spouse work some? You may not have to change your lifestyle much if the two of you are willing and able to work more. Alternatively, can the two of you move somewhere cheaper (new location or new apt/house), or refinance your loans, trade your cars for something cheaper, postpone certain expensive luxuries for a while, etc?

 

[Wealth Anatomy]

I think you're going to need an accountant at some point. I would suggest looking for someone now that can help you with your tax planning. They'll be able to run projections on what you need to be withholding from your compensation.

Ideally (and in a perfect world), at the end of the year, you'll owe no additional taxes and you will not be getting a refund. This means that your tax planning was done correctly throughout the year.

We don't want to be giving any interest-free loans to the government in the form of excess taxes throughout the year (which may be what you're doing now)!

 

[NICUfello]

I am making the same as you. I also take home about $100 less than you.

1st month out of fellowship, first job. 2 kids in day care (1900$ a month), plus living in big west coast city.

I am saving $3600 a month, after mortgage, kids, 2 car payments, school loan. Once the car paid off next year, I should be saving $4500 a month.

 

[dpmd]

If you tell us your loan situation and other expenses we can offer better advice. Wherever you were for residency this job should be a massive jump in income that shouldn't be leaving you struggling.

 

[Yellow mellow]

Thanks for all the input so far. I know that this is a big jump in salary from residency, however, I do owe a lot in student loans. Federal alone is at 400, private is at 150. My husband was a medical student but had to leave due to some health issues so he has loans ( fed at 250 and private at 120 ) that I m shouldering until he finds a job. We live in a very expensive city ( rent is at 2400 ) not a personal choice, job is here. We had one car between us that was breaking down right before this new job so we had to purchase a car. So here is the breakdown: fed loan is currently in ibr until next year, private loans is around 3000, car payment 400 . Then there are the normal expenses phone, electric, food, gas, etc...
By next year, we are going to run short by roughly 4G . With only a bachelor, I don't think my husband will find a job that will bring home 4000 after tax. I know our loans are crazy but there were circumstances . Neither of us have parents so family assistance is null. The only possible solution I see is moonlighting during the weekends. There will be no savings. Other than that, I have thought about moving to another state where housing is cheaper and no state tax. Ideally I don't want to leave my new current job, I would qualify for PSLF if it still exist in ten years.
Please I don't need any comments on how massive my loans are....I'm aware of that. I can't sleep at night and feeling like I'm sinking into depression.

 

[QofQuimica]

Where people live is obviously a matter of very personal choice, but I can tell you this: your location is not helping your problem. You said you and your husband both had no family. Outside of your job, is there any reason at all to stay in your current city? Would you and he consider moving to a smaller city in a state like TX or FL that doesn't have income tax? There are other jobs that qualify for PSLF, and you could really save a lot of money by cutting your living expenses, not paying state income tax, and just taking advantage of an overall cheaper COL. Here in FL, for example, you could easily cut your rent in half for a nice 2BR/2BA apt (and you could even cut your rent by two thirds or more, depending on how rural you're willing to go).

Second, is your husband working now at all? Assuming you guys don't have kids and that his health allows it, I suggest he get a job, ANY job, for now, while continuing to look for a better job. Even a minimum wage salary delivering pizzas or answering phones is better than nothing, and you can apply all of his income toward paying off the loans since you're living off your salary. You moonlighting is obviously also an option, but there are only so many hours in a week, and you need some time to sleep and recuperate too.

Third, all of your loans come out to around $920,000 plus the car loan if I'm understanding correctly. Have you looked into refinancing them? Even if it's going to cost you more in the long run because of stretching out your payments for more years, as you already said, your monthly payments on that much debt are going to be astronomical even on a physician's salary. Alternatively (and this relates back to point #1), would you consider going to work in a location of high need (probably rural and in the South or Midwest) where they would agree to pay off some of your loans in return for you promising to spend a certain number of years working there? Especially if you're in IM or FM, there are places that have trouble attracting docs that might be willing to work out a deal like that.

 

[dpmd]

Why ibr only until next year? Or do you mean the calculated ibr payment will go up to a crazy amount? Can hubby do an unemployment deferment? Is there a 401k with matching that you can participate in (which will bring your taxable income down and therefore your ibr payment down)? Did you fill out the w4 worksheet to figure out how many exemptiond you should be claiming? I bet it is more than 2 so if you want to be safer to avoid owing you can go one less but 0 is giving the government an interest free loan with money you could be using for other things. As for next year when you think you may be 4k short every month be sure to minimize all expenses then figure out which lenders will work with you easier regarding payment plans. You shouldn't get put into default unless you just ignore things. Trying for federal forebearance due to the size of the private loans may be possible if the ibr payment is truly unsustainable but it is designed to be sustainable so make sure that won't work first.

 

[Yellow mellow]

Thanks dpmd for your insight. Yes, I mean ibr will go from 900 to possibly 4200. I'm hoping that the new PAYE that president Obama is trying to implement will be available so that will help us out. Yes I'm mandated to put into both 401 and pension, however, we are short so how do I contribute more? I'm afraid of unemployment deferment because interest continues to accrue which will make it worst for us once we start paying. I did claim 0 because I did not want to owe anything. Meeting with an accountant tomorrow to see if she has anything to offer as well. Trust me, I'm watching every penny....no eating out, nothing. I do try to focus on the fact that I do have a job so I can pay back albeit not enough.

 

[Yellow mellow]

QofQuimica, I just started this job one month ago fresh out of residency. I don't think it would be wise to leave now. As I mentioned earlier, I'm looking into states like TX or FL where COL and no state tax would help us. But that would have to wait for at least a year right? I have looked at multiple places to live but all of the surrounding cities are costly, one or two hundred dollars cheaper for a much older apartment but worst is the daily traffic which adds roughly an extra hour on the freeway.
As for refinancing, can you do that with fed loans? Private loans maybe, but my credit isn't stellar with this much loan.
My husband is in the process of looking for a job...any job.
I'm not in IM or FM, but I'm sure I can find something in either TX or FL. This is annoying but I also have severe sinus and allergy issues with three sinus surgeries along with steroid and shots that hasn't been that effective. I mention this because where I live is important.
On a side note, I really appreciate all the advice I'm getting here. I've been using this forum since med school and this site has been invaluable to me.

 

[QofQuimica]

What does your contract say? I have to give three months' notice at my job. So theoretically, I could give notice now and start somewhere else in January even though my contract goes through July.

Whether it's wise to jump ship so early is hard to say....it's true you may burn some bridges by leaving early, especially if your hospital is short-staffed and you'd be leaving them high and dry. On the other hand, you also have to do what's best for you and your family. I guarantee you that if your hospital needed to cut costs, they'd have no problem laying you and/or some of your colleagues off!

I don't know the answer to your question about refinancing federal loans, so hopefully someone else here has more insight. But if you've never tried, it's not going to hurt anything to call your loan providers and ask.

Here's a link to the NHSC if you haven't already looked at that: https://nhsc.hrsa.gov/loanrepayment/nhscloanrepayment/index.html. Besides IM and FM, OB/gyn, peds, and psych also qualify.

Link to a similar program in OH: http://www.odh.ohio.gov/odhprograms/chss/pcrh_programs/recruitment/slrp.aspx

 

[dpmd]

Thanks dpmd for your insight. Yes, I mean ibr will go from 900 to possibly 4200. I'm hoping that the new PAYE that president Obama is trying to implement will be available so that will help us out. Yes I'm mandated to put into both 401 and pension, however, we are short so how do I contribute more? I'm afraid of unemployment deferment because interest continues to accrue which will make it worst for us once we start paying. I did claim 0 because I did not want to owe anything. Meeting with an accountant tomorrow to see if she has anything to offer as well. Trust me, I'm watching every penny....no eating out, nothing. I do try to focus on the fact that I do have a job so I can pay back albeit not enough.

The unemployment deferment is just an option in case you can't meet the payments. As for contributing more to retirement you just have to see if you can make do with a little less every month. I am not sure how often they will let you change the contribution but if it they let you do it whenever just try it for a month and then you can see how much your take home really changes (it won't change as much as you contribute because your taxes are calculated after that amount is taken, but it will depend on how much you make and how much you contribute). Like I said the amount you contribute will not be included in the calculation for IBR so next year your payment wouldn't go up as much so might be more doable with your husband's new job (or by dropping your contribution if your have no other choice).

Do you guys have kids?

 

[thesauce]

I am making the same as you. I also take home about $100 less than you.

1st month out of fellowship, first job. 2 kids in day care (1900$ a month), plus living in big west coast city.

I am saving $3600 a month, after mortgage, kids, 2 car payments, school loan. Once the car paid off next year, I should be saving $4500 a month.

You have $900/mo in car payments?

 

[QofQuimica]

You have $900/mo in car payments?

Maybe he's making double or triple payments so he can pay the loans off faster. I'm paying more than $900/mo because that's what I'm doing.

 

[thesauce]

Maybe he's making double or triple payments so he can pay the loans off faster. I'm paying more than $900/mo because that's what I'm doing.

Interest rates on car loans are so low right now that I'd be more apt to string it along as far as possible

 

[mgdsh]

Interest rates on car loans are so low right now that I'd be more apt to string it along as far as possible

There's some variability to that. I've seen car loans in the range of 0 - 5% over the last year or so, depending on the car and source of funding (that's with good+ credit).

If it's possible, I'd try to focus on paying down the loan with the highest interest rate.

 

[thesauce]

There's some variability to that. I've seen car loans in the range of 0 - 5% over the last year or so, depending on the car and source of funding (that's with good+ credit).

If it's possible, I'd try to focus on paying down the loan with the highest interest rate.

There's always variability to loan rates, however anything over 3% right now (with good credit) is a rip-off - and I would never pay additional to anything under 4%.

 

[NICUfello]

You have $900/mo in car payments?

That is what I pay per month, yes. It is significantly more than the "required" payment, so that I can be done with them. Rates are 0.9% and 2.1%.

You are correct, instead of paying towards the car, I should put the extra money towards the student loans, which are 5%.


OP-My rent was 2300$ during fellowship. All my salary, numbers, all same as yours, my loan isn't nearly as much.

Good luck.

 

[mgdsh]

You are correct, instead of paying towards the car, I should put the extra money towards the student loans, which are 5%.

Definitely, especially as we can't deduct student loan interest at our salaries.

I've even had friends take equity out of their homes to pay off/pay down student loans, as the former is at the least a deduction and also more likely to be at a lower rate.

 

[thesauce]

That is what I pay per month, yes. It is significantly more than the "required" payment, so that I can be done with them. Rates are 0.9% and 2.1%.

You are correct, instead of paying towards the car, I should put the extra money towards the student loans, which are 5%.

Or just put it in a high interest account. Those rates are significantly lower than inflation - no reason to pay them off quickly.

 

[NICUfello]

Definitely, especially as we can't deduct student loan interest at our salaries.

I've even had friends take equity out of their homes to pay off/pay down student loans, as the former is at the least a deduction and also more likely to be at a lower rate.

I just bought my house, so not enough equity to do as you suggested, but will definitely keep that in mind for the future.

I have two loans (30K and 155K) both consolidated. I am trying to call them to see if I can pay the 30k first. They are both included in 1 payment, and not much is going to the 30K, per hte loan company.

 

[dpmd]

I just bought my house, so not enough equity to do as you suggested, but will definitely keep that in mind for the future.

I have two loans (30K and 155K) both consolidated. I am trying to call them to see if I can pay the 30k first. They are both included in 1 payment, and not much is going to the 30K, per hte loan company.

Which has higher interest rate and are you paying more than the required payment?

Edit: you want to pay the higher interest rate loan even if it is the bigger one. Saves you the most money. But is you are just doing the required payment they won't let you apply the payment to just one loan. If it is extra payments it is possible but will likely not default to that so you will need to find out their special paymenthandling instructions and keep an eye on it to make sure it is applied correctly.

 

[NICUfello]

Both have same exact interest. I just paid first month of $900. Haven't made any extra payments yet, trying to get all finances in order to come up with a plan.

Which has higher interest rate and are you paying more than the required payment?

Edit: you want to pay the higher interest rate loan even if it is the bigger one. Saves you the most money. But is you are just doing the required payment they won't let you apply the payment to just one loan. If it is extra payments it is possible but will likely not default to that so you will need to find out their special paymenthandling instructions and keep an eye on it to make sure it is applied correctly.

 

[dpmd]

Both have same exact interest. I just paid first month of $900. Haven't made any extra payments yet, trying to get all finances in order to come up with a plan.

All right. First thing they will do with your payments is apply it to any fees and outstanding interest. That will be for both loans if it is with the same lender (if you had really different interest rates there is a way around this but it involves forbearance and sending extra payments and isn't needed in your scenario). Then it will be applied to whatever required minimum principle payment you have (which is why if you just pay your minimum payment you can't direct which loan it will go to). Anything extra will do one of several things depending on their set up - get applied evenly across loans (the most common thing I have seen), get applied to one loan (haven't seen this as a default but was an option for me with two different lenders provided you indicated that is what you wanted and they actually hand processed it, otherwise I had to call each month for them to fix how it was applied), advance your due date (this problem I noted more with trying to pay off my mortgage, basically if you send in a big enough amount they deduct the interest that would have accrued the next month along with the principal for next month so then you don't owe a payment the next month, except I kept sending extra payments and suddenly my due date was in 2015 and I had paid a lot more interest than I should have. I have no idea why anyone would do that on purpose so I figured it was just a way to get extra money out of people who don't pay attention. Was able to get it retroactively fixed but it was an ongoing hassle).

Should be something that is easy to call about and get going on, then in about 2 years you will have paid it off and can send all the payments you were sending that loan to the next loan. You get used to living without that money so might as well use it to your advantage (would advise something similar with your car payments although putting it toward retirement is another good idea, just basically keep it as an payment you make but it is to yourself instead of just being more money a month that you can blow on bull****.

 

[dpmd]

Unfortunately for the op it sounds like the bull**** she will be blowing money on will be food and rent rather than actual wasteful stuff.

 

[NICUfello]

Thank you very much.

My mortgage, online has a special box where if you make extra payment you can click "apply to principle"


Here is my exact loan amount (curent balance)

$164K, UNCNS loan program, payment $699, 5% rate
$36k , SUBCNS loan program, payment $155, 5% rate.

All with AES. Payment is around 900$ for 30 years, and 2200$ for 10 years.

All right. First thing they will do with your payments is apply it to any fees and outstanding interest. That will be for both loans if it is with the same lender (if you had really different interest rates there is a way around this but it involves forbearance and sending extra payments and isn't needed in your scenario). Then it will be applied to whatever required minimum principle payment you have (which is why if you just pay your minimum payment you can't direct which loan it will go to). Anything extra will do one of several things depending on their set up - get applied evenly across loans (the most common thing I have seen), get applied to one loan (haven't seen this as a default but was an option for me with two different lenders provided you indicated that is what you wanted and they actually hand processed it, otherwise I had to call each month for them to fix how it was applied), advance your due date (this problem I noted more with trying to pay off my mortgage, basically if you send in a big enough amount they deduct the interest that would have accrued the next month along with the principal for next month so then you don't owe a payment the next month, except I kept sending extra payments and suddenly my due date was in 2015 and I had paid a lot more interest than I should have. I have no idea why anyone would do that on purpose so I figured it was just a way to get extra money out of people who don't pay attention. Was able to get it retroactively fixed but it was an ongoing hassle).

Should be something that is easy to call about and get going on, then in about 2 years you will have paid it off and can send all the payments you were sending that loan to the next loan. You get used to living without that money so might as well use it to your advantage (would advise something similar with your car payments although putting it toward retirement is another good idea, just basically keep it as an payment you make but it is to yourself instead of just being more money a month that you can blow on bull****.

 

[QofQuimica]

After getting my first paycheck yesterday, I agree with those who say the OP may be over-withholding her income taxes. But it doesn't help that she's also in a high tax/high COL area with such high loans. It's like a perfect storm of financial suckiness.

OP, I still think the only way out of this mess is going to be to leave your current city and go somewhere with cheaper COL so that you and your husband have a fighting chance of affording it all (and hopefully including a deal with some kind of loan forgiveness component). I hope things work out for you guys.

 

[sazerac]

So I m gonna admit that finance is not my thing but I'm learning. My first job out of residency pays 195000 so I thought take home should be around 11G or so. Although I'm married, I was told to claim 0 to avoid owing money when filing next year. What is shocking is my monthly check is only around 8800/month . Am I missing something here? I won't be able to save any money because my loan repayment and where I'm living along with other expenses will leave me living like a resident... Maybe worst. Please any guidance would help. Thanks

I am finding it hard to imagine any scenario where a married person would need to claim 0 to avoid owing money next year. You must have MASSIVE amounts of cash withheld from your paycheck every month, money that is rightfully yours. When it is tax time next year you are likely going to get a huge refund, and you have basically been loaning your money to the government at 0% interest all this time.

You say that this is your first job out of residency. So you probably had a huge jump in income in July of this year. The government is going to withhold money from your paycheck as if you have been making that monthly income all year. You aren't. Half of your income is a low residency rates. In essence, even if you told the truth, your withholding will be way too much because they are withholding at rates appropriate for somebody making $200Kish a year when in fact you will have earned only $125Kish.

You have a couple of choices here. You can tell the truth on your withholding form and accept that you are still going to have a little extra withheld from your paycheck this year unnecessarily. Or you could calculate (1) how much income you are likely to get this year, (2) how much it will be taxed, and (3) adjust the figures on the W-4 form so that the amount of taxes withheld by Dec 31st basically matches the amount of taxes you will owe. That might be a lot of work and you could have an accountant do it for you, but it's probably not worth the effort.

When I was single, I once had a jump in income in August. It turns out that for the rest of that year the most appropriate number on my W-4 that year was not 1, and certainly not 0, it was 5. Very little was deducted from my paycheck for the rest of that year because I only had 5 months of big income that year. When January rolled around, I filed a new W-4 with the truth on it.

We have been given very little data about your situation, but sitting here in my armchair I predict you have probably paid your income taxes through the end of September by now, and I am guessing the most appropriate decision would be to refile a new W-4 with your employer but adding a few extra thrown in, like file it with a 3 or a 4 instead of 0. Then in January just tell the truth on your W-4 because you will have a steady income stream all year and the W-4 does a pretty good job at withholding the correct amount in those scenarios.

 

[dpmd]

Trying to work the w4 for the remainder of the year may be too much for her but filling it out accurately shouldn't be. Op should do one of those things and that would give her an extra chunk of money. It won't be the 4k extra she is anticipating needing next year, but it is more than she needs at the moment so adusting her 401k so she is contributing more would be good (and will reduce her taxable income so ibr payment will be less than predicted)

 

[Yellow mellow]

I saw the accountant on Friday and she like my tax lady said claiming 0 is correct to avoid owing tax. Btw, we don't have kids, unless dogs and a cat count. I'm contributing 3% to 401K and hospital matches that amount. I'm also mandated to contribute into a pension. So I'm really confused now. Should I claim 0,1 or 2??
I did sign a contract for one year and besides with no money saved, we can't move anywhere right now. I understand that eventually-- meaning a year or two, we will have to move. But for now I will gave to moonlight and my husband will have to find a job. Does anyone know if moonlight is considered overtime or will tax be about a third like regular income? Also, if I do or when I rather, moonlight this would potentially put me over the 200k mark so does that mean a lot more tax withdrawn? Lastly, is the new PAYE only a proposal or a definite for next year? I just need some hope.

 

[dpmd]

I saw the accountant on Friday and she like my tax lady said claiming 0 is correct to avoid owing tax. Btw, we don't have kids, unless dogs and a cat count. I'm contributing 3% to 401K and hospital matches that amount. I'm also mandated to contribute into a pension. So I'm really confused now. Should I claim 0,1 or 2??
I did sign a contract for one year and besides with no money saved, we can't move anywhere right now. I understand that eventually-- meaning a year or two, we will have to move. But for now I will gave to moonlight and my husband will have to find a job. Does anyone know if moonlight is considered overtime or will tax be about a third like regular income? Also, if I do or when I rather, moonlight this would potentially put me over the 200k mark so does that mean a lot more tax withdrawn? Lastly, is the new PAYE only a proposal or a definite for next year? I just need some hope.

If all you said was you absolutely want a refund then that advice would be correct in a way, but if she didn't actually do any calculating I don't know the value of what she said. All I know is filling out the w4 according to instructions gets you closest to withholding the right amount. How many do you get when you do that?

 

[sazerac]

I saw the accountant on Friday and she like my tax lady said claiming 0 is correct to avoid owing tax.

The goal is not to avoid owing tax April 15th. If that was the goal, you should withhold your entire paycheck, earning zero dollars per month, and then get a huge refund in April. You are basically doing something close to this, and as you've noticed, your paycheck is tiny because you are having way too much money withheld from your paycheck every month.

The goal is to pay the correct amount of taxes throughout the year so that when April 15th rolls around you either owe or are refunded a small amount (<$1,000). What if you asked your accountant and tax lady how you should fill out your W-4 so that the amount of taxes either owed or refunded is kept to an absolute minimum this year?

 

[thesauce]

I saw the accountant on Friday and she like my tax lady said claiming 0 is correct to avoid owing tax. Btw, we don't have kids, unless dogs and a cat count. I'm contributing 3% to 401K and hospital matches that amount. I'm also mandated to contribute into a pension. So I'm really confused now. Should I claim 0,1 or 2??

Whatever you do in terms of withholding is small potatoes. If you don't put down the right numbers this year, you'll get more back at tax time and then you can adjust (as an aside: for some, giving an interest free loan to the government isn't the worst thing - some people would just spend the money on crap if it wasn't withheld from their paycheck). You have way bigger fish to fry.

BTW, given your situation, I would seriously consider getting rid of the pets. Animals can be expensive and you can't afford to be supporting others at this point.

I did sign a contract for one year and besides with no money saved, we can't move anywhere right now. I understand that eventually-- meaning a year or two, we will have to move. But for now I will gave to moonlight and my husband will have to find a job. Does anyone know if moonlight is considered overtime or will tax be about a third like regular income?

It doesn't make any difference how it's classified. Overtime pay is taxed in the same manner as regular wages.

Also, if I do or when I rather, moonlight this would potentially put me over the 200k mark so does that mean a lot more tax withdrawn?

We have a progressive tax structure, so you are only taxed higher on the amount that falls in the higher tax bracket. For 2014, you'd pay 28% on what you earn between $146,401 - $223,050 and then 33% on the amount between $223,050 - $398,350. So if you make $223, 051 for the year, you are only taxed at 33% for 1 dollar. This is all assuming you are married, filing jointly.

 

[The White Coat Investor]

Well, you came here with a fairly easy issue that can quickly be resolved- i.e. how much tax to have withheld. Certainly "withholding zero" isn't the right answer. I'd just fill out a W-4 and go with that as far as withholdings. It will likely be close enough. What is withheld, of course, is very different from what you actually owe, but as long as the two are close, no big deal. Chances of you owing any penalty is extremely unlikely this year given safe harbor rules.

However, the discussion has revealed that you are up a creek without a paddle with regards to your finances. Some of that is bad luck, some is the result of bad decisions. It really doesn't do any good at this point to try to figure out what is what. The main issue here is you have too much debt for your income.

Your student loans: $550K
Your spouse's student loans: $370K
Some type of car loan

Now $920K isn't my record for student loans (that's $950) but it is my record for when only one of the spouses is working. It is a ton of debt.

I mean, I make a heck of a lot more than you and I'd be very uncomfortable with that kind of debt. This is a huge problem. Once you recognize that, you can start chipping away at it.

First thing: Get a student loan plan. PSLF would be a great option for you. If your job does not qualify, I would very seriously consider switching into one that does. The sooner the better. Look into whether any of your husband's loans can be forgiven for disability or whatever.

Second thing: Boost income. A spousal income would help a lot, but a better paying job for you would help too.

Third thing: You have to live like a resident or worse, at least for a couple of years. You don't have the choice that most docs do. You''ll go bankrupt if you don't.

Fourth thing: Stop buying stuff on credit. Frugal people don't buy cars on credit and they don't end up with $550K in student loans no matter where they go to school. You've got to get control of your spending. Granted, this isn't the biggest issue NOW that you already have this debt, but it did contribute.

Fifth thing: Relocating seems like a great option. Lower cost of living/income taxes will help. I'm sure there are cheaper places that are still okay allergy-wise.

 

[NICUfello]

Well, you came here with a fairly easy issue that can quickly be resolved- i.e. how much tax to have withheld. Certainly "withholding zero" isn't the right answer. I'd just fill out a W-4 and go with that as far as withholdings. It will likely be close enough. What is withheld, of course, is very different from what you actually owe, but as long as the two are close, no big deal. Chances of you owing any penalty is extremely unlikely this year given safe harbor rules.
.

Is there a penalty if you had the govt withdhold everything (as someone said) and then you got a refund for say $150k?

Just asking in wanting to learn.

 

[thesauce]

Is there a penalty if you had the govt withdhold everything (as someone said) and then you got a refund for say $150k?

Just asking in wanting to learn.

No. There is only a penalty if you don't withhold enough.

 

[Yellow mellow]

BTW, given your situation, I would seriously consider getting rid of the pets.

I've had my two small dogs for 10 years and they're family, one of the very few best part of my life so " getting rid " of them would never happen.

The goal is to pay the correct amount of taxes throughout the year so that when April 15th rolls around you either owe or are refunded a small amount (<$1,000). What if you asked your accountant and tax lady how you should fill out your W-4 so that the amount of taxes either owed or refunded is kept to an absolute minimum this year?

That's my goal. Good idea, I'm going to ask her that.

First thing: Get a student loan plan. PSLF would be a great option for you.
My current job would qualify me for this IF it's still around in ten years.

Second thing: Boost income. A spousal income would help a lot, but a better paying job for you would help too.
Looking into moonlighting and husband is looking too.

Third thing: You have to live like a resident or worse, at least for a couple of years.
We are doing that.

Fourth thing: Stop buying stuff on credit.
We owe less than 275 on c/c.

Fifth thing: Relocating seems like a great option. Lower cost of living/income taxes will help. I'm sure there are cheaper places that are still okay allergy-wise.

Eventually we will

Thank you again for all the advices, I've certainly learned something . Btw, I need to ask again, is the new PAYE a proposal or a definite for next year available for all borrowers?

 

[sazerac]

The new PAYE-for-all program was an executive order signed by the president, so barring action by congress or perhaps the president changing his mind and signing a new order, it will take effect in 2015. I think the odds are quite high that it will go into effect.

If you have your loans forgiven through PAYE, you will have to pay income taxes on the amount of forgiveness. Roughly, only 2/3 of your outstanding loan will be forgiven through PAYE, and the other 1/3 will be due, in taxes, immediately. In your case, the amount of taxes will be enormous.

If you get your loans forgiven through PSLF, the forgiveness is a tax-free event. It is literally free money.

You are basically in a race here. You'll want to be sure and collect ten years of non-profit employment BEFORE you collect 20 years of total employment. It would be terrible if you accidentally collected 10.1 years of for-profit employment... because then PAYE and huge taxes would arrive before you could ever collect enough non-profit work to qualify for PSLF.

 

[Yellow mellow]

You are basically in a race here. You'll want to be sure and collect ten years of non-profit employment BEFORE you collect 20 years of total employment. It would be terrible if you accidentally collected 10.1 years of for-profit employment... because then PAYE and huge taxes would arrive before you could ever collect enough non-profit work to qualify for PSLF.

Sorry I don't quite understand what you're saying. I m currently on IBR and will switch over to PAYE once it's available then apply for PSLF when I get close to 120 payments. Assuming I will continue working for non-profit for the next ten years. So, am I missing something?

 

[Yellow mellow]

Btw, moonlighting at a for profit employer would not disqualify me would it?

 

[dpmd]

Sorry I don't quite understand what you're saying. I m currently on IBR and will switch over to PAYE once it's available then apply for PSLF when I get close to 120 payments. Assuming I will continue working for non-profit for the next ten years. So, am I missing something?

He was referencing someone not currently working somewhere that would qualify for pslf.
Also moonlighting should be fine because the requirement is enough hours at the public service job. It would increase your payment but with your loan amount I don't think it will make a difference, whereas someone else may end up with no loan to forgive if they moonlighted enough.

 

[sazerac]

Sorry I don't quite understand what you're saying. I m currently on IBR and will switch over to PAYE once it's available then apply for PSLF when I get close to 120 payments. Assuming I will continue working for non-profit for the next ten years. So, am I missing something?

If you keep working for non-profits, you will be fine. I was just pointing out that if you worked for 19 years at a for-profit and then decided to work at a non-profit for 10 years, *boom* after one year of non-profit employment your loans would be forgiven (because you have 20 total years of qualifying payments) and you would be hit with an enormous tax bill.

Basically as soon as you work for 10 or more years at a for-profit, you are doomed to be hit with an enormous tax bill.

 

[NICUfello]

I am on a standard repayment plan. I am hoping to pay it off in 10 years.

I am being dumb for doing that? Everybody seems to be doing PAYE, IBR, and PLSF.

Me being in private practice, disqaulifies me for some of that.

Any thoughts?

 

[dpmd]

I am on a standard repayment plan. I am hoping to pay it off in 10 years.

I am being dumb for doing that? Everybody seems to be doing PAYE, IBR, and PLSF.

Me being in private practice, disqaulifies me for some of that.

Any thoughts?

There are some specific scenarios where someone would be better off doing PSLF (assuming the program doesn't get phased out for higher earners or otherwise becomes not accessible), but for anyone not in a PSLF job the other options are more for if you can't afford to make full payments (or those with higher interest rate debt to pay off). You typically end up paying more if you don't do standard repayment as soon as possible. Even if you are in a PSLF job it might be better to make standard repayment if you can (what about if you get a better job offer that wouldn't qualify, or leave that PSLF job for whatever reason).

 

[mgdsh]

I am on a standard repayment plan. I am hoping to pay it off in 10 years.

I am being dumb for doing that? Everybody seems to be doing PAYE, IBR, and PLSF.

Me being in private practice, disqaulifies me for some of that.

Any thoughts?

There are a lot of factors that go into something like that. For myself, what I'll earn outside of jobs that would qualify me for one of the above programs far and above outweighs how much they'd help.

 

[thesauce]

I am on a standard repayment plan. I am hoping to pay it off in 10 years.

I am being dumb for doing that? Everybody seems to be doing PAYE, IBR, and PLSF.

Me being in private practice, disqaulifies me for some of that.

Any thoughts?

There is no downside to IBR compared with the standard 10-yr repayment (I don't know much about PAYE). They both qualify for PSLF if you work for a non-profit, but IBR has some potential benefits in terms of interest.

IBR still allows you to make additional payments on top of your minimum payments so you might as well be on IBR and pay the difference (what you pay now vs what IBR requires) towards the smallest loan to make it disappear faster.

With all your loans being at the same rate, it probably won't save you anything (assuming you were on IBR during residency - if not, it might save you some interest).

 

[dpmd]

There is no downside to IBR compared with the standard 10-yr repayment (I don't know much about PAYE). They both qualify for PSLF if you work for a non-profit, but IBR has some potential benefits in terms of interest.

IBR still allows you to make additional payments on top of your minimum payments so you might as well be on IBR and pay the difference (what you pay now vs what IBR requires) towards the smallest loan to make it disappear faster.

With all your loans being at the same rate, it probably won't save you anything (assuming you were on IBR during residency - if not, it might save you some interest).

If you do standard repayment while doing your pslf job you would pay off the loan in ten years so nothing would get forgiven (unless you were on ibr before). The standard repayment is designed to pay off the loan in ten yrs. The one downside to doing ibr and paying your standard repayment amount is the extra paperwork, but if your income is not consistent (I am self employed so I don't get a set amount every month) I can see it being worth it (not for the loan amount and rates I have but for the current rates and average amounts yes) so a lean month doesn't affect your ability to pay.

 

[thesauce]

If you do standard repayment while doing your pslf job you would pay off the loan in ten years so nothing would get forgiven (unless you were on ibr before). .

Correct. This was referring to those that were on IBR during residency. Probably most of us. They just need to complete the rest of the 120 payments on the standard plan.

The standard repayment is designed to pay off the loan in ten yrs. The one downside to doing ibr and paying your standard repayment amount is the extra paperwork.

It's one page that you mail with your income tax statement. No big deal.

 

[dpmd]

Correct. This was referring to those that were on IBR during residency. Probably most of us. They just need to complete the rest of the 120 payments on the standard plan.



It's one page that you mail with your income tax statement. No big deal.

Eh, I mail in no pages and prefer it that way. Pointless to do so if you are sure you are paying things off, but makes more sense for people who had already been doing it on the off chance they change to a job that qualifies (or for a safety net like I described above). I have to remember that a lot has changed since I went into repayment.