STUMP » Articles » Taxing Tuesday: Meep Files Her Taxes » 19 February 2019, 04:31

Where Stu & MP spout off about everything.

Taxing Tuesday: Meep Files Her Taxes  

by

19 February 2019, 04:31

Last week, I started entering my info into TurboTax, and then I officially filed on Saturday. I got refunds from the feds, New York, and Connecticut. The New York situation is ridiculous — I earn all my income in Connecticut (currently). But I still have NY state tax withholding from my main job… and my net tax is essentially zero every year. I get all that withheld tax back. My only “New York income” is the interest I get from my credit union account.

Connecticut. Ugh. Yeah, my state income taxes are more than half of my federal income taxes.

My effective tax rate is tax total vs. adjusted gross income (as opposed to taxable income).

My effective tax rate for 2018 was:
Federal: 9.4%
Connecticut: 5.1%
New York: 0%

Compare against my 2017 rates:
Federal: 10.2% (I actually have a 5-year history, so 2016-2013 went 11.4%, 9.9%, 9.7%, 10.8%)
CT: 5.1%
NY: 0.02% (yes, really)

Note: my gross income in 2017 was about $10K higher than in 2018, but the 6 years of history of effective rates represents fluctuations of up to $30K in gross income.

My gross income is fairly high — using this model of income, we’re approximately in the top 10%. I hit the SALT cap (both property taxes and state income taxes are obviously high).

And I still got an 80-basis point tax cut.

No, it’s not huge when stated on that basis, but it is more than $1,000, given my income level. My refund was less than $1,000… because, as mentioned in a prior post, my net takehome from my withholding job went up 2%.

You will see below people bitching about their tax filings… I really don’t think any of them really owed more in taxes for 2018 than they did for 2017 (except if they had higher income). What happened is much less was withheld, and they didn’t adjust their withholdings (which they should have done). My withholdings went down, and I got a lot of my tax cut in the form of higher net pay in 2018 itself.

Thanks, Trump!

VALENTINE’S DAY INTERLUDE

Yes, it was last week, but… this wasn’t posted til Wednesday of last week.

AUSTRALIAN TAX EXPLAINER

REFUND IDIOTS

I am trying to calm down about this bullshit, but every time I read one of these stories, I blow my top.

Surprise, no tax refund for you! What not to do if you owe the IRS.

“As a retiree on a fixed income, I depend on my tax refund for some of my rainy-day fund,” wrote Virginia resident Carolin Ringwall. “My refund is $1,500 less than last year, even though everything else is the same.”

The new law increased standard deductions but removed personal exemptions, and it limited or discontinued certain other deductions. For instance, the total combined deduction for sales, property, and state and local taxes is now limited to $10,000 ($5,000 if married and filing separately).

“The updated federal-tax withholding tables, released in early 2018, largely reflected the lower tax rates and the increased standard deduction brought about by the new law,” the IRS said in a statement. “This generally meant taxpayers had less tax withheld in 2018 and saw more in their paychecks.”

Here’s the problem: Any increase may have been so small that people didn’t realize they were getting more money in their paychecks and that it would result in much smaller refunds when they finally filed their returns.

MAYBE THEY SHOULD PAY ATTENTION TO THEIR MONEY.

via GIPHY

You were getting more money throughout the year, and you pissed it away. You should have been building up your “rainy day fund” from the 2% (or whatever) bump in income. But you didn’t.

“I just did my taxes, and I am in tears,” Louise Lewis from Virginia wrote to me in an email. “For 29 years, and in spite of all the changes to the tax code through all the different administrations and political parties, my taxes have been relatively stable. This new tax reform has really hurt me, and I owe a lot of money. The limit on state and local tax deductions is what did it. I owe almost $2,000 more in taxes this year because of that one change.”

I call bullshit. Or that this person might be a little less sympathetic than you may think.

I want details, because a very small portion of taxpayers will have to pay more… and they tend to be extremely high income.

I also hit the SALT cap, here in high tax New York and Connecticut. I still got a tax cut. Not as large as if the SALT cap didn’t exist, but it still existed.

Unfortunately “Louise Lewis” is such a generic name, even with the detail “Virginia”, I have no idea who this person is. Does she own several businesses? Five houses in different states? No clue.

“I’m estimating a huge tax bill,” one reader wrote during my weekly online discussion. “Our taxable income is much higher than last year, because we lost about $6,000 in deductions and $16,000 in personal exemptions. We lost about $2,000 in tax credits. And, we had about $2,000 less income tax withheld. So instead of last year’s tax bill of $1,500, I think our tax bill is going to be over $15,000.”

Now this person has no name at all. So… I’m still not being given enough information to see how this change occurred. I’m guessing some sort of self-employed situation, but again – no clue.

SOLID TAX ADVICE

That said, the article has very good advice:

File your return on time, even if you can’t pay in full. There are two pesky penalties you want to avoid — one for filing late, and the other for failing to pay on time.

When I’ve had to write a check, I generally file at the beginning of April, and write the check then. Never do an “oops, I forgot to file!”

Yes, you can apply for an extension… but there are catches.

Pay what you can. Unlike a lender that may kick back a partial mortgage payment, the IRS will take what you’ve got. If you can’t pay the full amount, file your return by April 15 anyway, and pay as much as you can to avoid penalties and interest. (The deadline is April 17 if you live in Maine and Massachusetts.)

You should pay what you can, and you can ask for an extension. I have lots of friends in the tax industry who have to file for extensions because they’re too busy doing other people’s (or companies’) taxes right now.

Don’t confuse filing an extension with extra time to pay. Your request for an extension does not mean that you get more time to pay. An extension applies only to filing your return.

That’s the catch. If you are going to owe, pay what you can by April 15 (or 17 if you’re in Maine or Massachusetts)… if you don’t pay that, even with an extension you will have underpayment penalties.

Apply for an installment plan. You can arrange to make monthly payments if you owe $50,000 or less in combined tax, penalties and interest, and have filed all required tax returns. For more information on how to apply for a payment plan, go to irs.gov and click the “pay” link.

There may be more people doing that this year.

If you’re experiencing a financial hardship, you can request that your account be placed in “currently not collectible” status. If approved, the IRS will temporarily delay collection until your financial condition improves. However, interest and penalties will still accrue.

Don’t fall for a debt-relief scam. No, it’s unlikely the companies you hear advertising on the radio can get your tax debt reduced for a fraction of what you owe. Skip this expensive middleman and contact the IRS at 1-800-829-1040 to discuss various payment options.

Filing this year may be frustrating, but don’t let your panic about being unable to pay your tax debt make you the victim of a con.

Please, if you were an idiot last year and didn’t re-look at your tax situation after the tax law change — don’t be a further idiot and think that you’re magically going to get out of whatever taxes you owe.

You may wish to go to a tax professional (whether chain or individual) to help you (and dear God, DO NOT GET A “TAX REFUND ANTICIPATION LOAN” – or Tax Refund Advance, or any of that shit. Wait for the frickin 3 weeks (or whatever) it takes for the refund to come to you. The fees generally aren’t worth it.)

I still have yet to hear a tax increase story that has enough details that one can understand what happened. There may be a sympathetic story… but I’m skeptical. They generally leave out crucial details.

Also, to reply to this Bloomberg piece – It’s Not Stupid to Want a Big Tax Refund. I will agree it’s not stupid. SO ADJUST YOUR DAMN WITHHOLDINGS.

The author claimed that the IRS made it more difficult to do the forced savings thing — that’s true ONLY IF you had 0 exemptions (btw, you can still elect to have extra $ withheld). If you had anything other than 0 exemptions, then the easiest way to increase your refund is to drop your exemptions to 0. That’s not hard to do. I had to adjust my withholdings several times after getting an obscenely high refund to prevent that from happening again.

TAX STORIES

My usual round-up:

There’s a Prisoner’s Dilemma type problem with that last one, but I would be for such a change… if you have to reduce taxes for all companies, that’s fine — but just to entice specific companies? Nope.

TAX TWEETS





Yup, I agree it is stupid.

But not for the reason he thinks.


Hmm, perhaps the US should try it.





I checked her profile — she’s in the Philippines… maybe they have enough smokers to do that. But we don’t in the U.S.




And here’s a twitter conversation I had.






1. I would be very happy to help people learn this stuff.
2. Yes, this is what I do on holidays.


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