Oh Crap, what is still on the table

[bingybear]

Got a free offer for TurboTax and saw something new. This may have absolutely nothing to do with the tax program, but it has me wondering what else I'm leaving on the table. This year we are not getting a state joint filing tax credit. Last year we got it, but DW had income over left over vacation and I had some actual earned income... so all was good. This year neither of us had "employer income". We both had investment income which does not seem to count in our state based on the program output. However, my roth conversion does count as income for calculating the joint filing deduction. I have some work to do to figure out what level of roth conversions (or IRA withdraw) will provide optimum joint filing credit.
I admit state taxes vary greatly, so this thread may or may not have real global interest. But my question is what else might I be leaving on the table? I think the PTC has been well discussed with some difference in opinion or choice. This may be local vs global optimization or situational difference. I really don't want to rehash the PTC here. But what else might I be missing? I'm funding our HSA with catch up contributions.
What else changes like this that might cause one to leave money on the table that would not have happened when both were working?

 

[braumeister]

No idea where you live, but I discovered a wrinkle this year that really surprised me. I'm a new resident of Kentucky, and they have a filing status I had never seen. We have always filed Joint returns, but I noticed that there is a "Married Filing Separately on This Combined Return" status.

In the description they say "You may file separately on this combined return regardless of whether you filed jointly or separately for federal purposes if both you and your spouse had income. This filing status usually results in a lower tax than filing Status 3 [the normal Joint return]."

Sure enough, filing this way, where you show both parties' income separately on the same return, saved a respectable sum.

Do other states have this filing status? I'd never heard of it before.

 

[NgineER]

Delaware has the same, filing joint but separate

 

[KRABE]

Braum, Iowa has that filing status as well.

 

[Philliefan33]

PA is the opposite. Spouses file on the same return, but it is technically two people filing separately. There is no state deduction, just a flat % on taxable income.

One "gotcha" with the PA system is if spouses have singly-owned taxable brokerage accounts. Mrs. Smith's capital losses can not be used to offset Mr. Smith's capital gains.

 

[bingybear]

I'm in Ohio. Our issue seems to be that I have income (1099R from Roth conversion), and we both have investment income, but neither have W-2 income. I'm using a different tax program that makes it more opaque, but I will go pull the instructions to verify the program is processing it right (I'm sure it is since the new program is turbo tax).

I'm curious if there are other surprises in RE that others have found that are still unknown to me.

I will check filing status. Since TT did not present the option of filing separately, it may be a law... or maybe not.

 

[Philliefan33]

OP-- don't know your state, but in PA I'd be checking to see if you qualified for state tax forgiveness or the real estate tax rebate program. I've been filling out a lot of those forms for clients with low taxable income.

 

[braumeister]

I will check filing status. Since TT did not present the option of filing separately, it may be a law... or maybe not.

I used to live in Ohio, so I can tell you that your filing status must be the same as you use for federal.

 

[bingybear]

I used to live in Ohio, so I can tell you that your filing status must be the same as you use for federal.

yes, the require "consistent" filing status fed and state. Its likely be a decade or more since I looked that up.

However, next year we will each do taxable $500 roth conversions to capture a likely small credit.

Philliefan33 -- I'll check that out. I don't expect we are low enough income. We do have a fair amount of investment income. It just does not qualify as income in figuring the joint filing credit.

 

[H2ODude]

Well, I know most here will snort and think "what a waste" but years ago when DW was in real estate I started having a guy do our taxes after having some trouble getting TurboT to do ... something. I have a CPA who charges me $250 a year and does several things including preparing the interest 1099 for the mortgage I wrote on DS house.

He's done several things over the years, one in particular I don't recall having to do with foreign earnings or credits that will buy his services til I'm long gone. So I'm more than happy to let him fiddle with it.

The big DISADVANTAGE to this is that having not done taxes for over 10 years now I'm sort of ignorant about some tax implications of a few of my actions. For example, it took me quite a while to figure out how much I could roth convert and in reality, I've concluded I don't want to pay as much tax as it would take to get me close to the next bracket anyway. I think. Anyway, $250 buys me a lot of assurance that I'm getting it done right.

 

[samclem]

The big DISADVANTAGE to this is that having not done taxes for over 10 years now I'm sort of ignorant about some tax implications of a few of my actions. For example, it took me quite a while to figure out how much I could roth convert and in reality, I've concluded I don't want to pay as much tax as it would take to get me close to the next bracket anyway. I think. Anyway, $250 buys me a lot of assurance that I'm getting it done right.

If you wanted to invest a few hours, you could buy a copy of tax software and just use the interviews and the info your accountant put on your 2016 return to reverse-engineer what he did and (most important) why. It would highlight the choices that were available, and actions you might be able to take to get your tax bill down. If you go this route, be sure to get software that shows where each entry in the forms comes from (other forms, or which interview section) and where it goes to. H&R Block used to do this very well. It still does it "okay," but I've been a bit disappointed of late in this particular feature, and maybe TT or another package does it better.

 

[bingybear]

For me the main issue is knowing what to do, not how to fill out tax forms. Using a program hides some of the underlying things. Paying someone to do you taxes hides the mechanisms even more. What I found out was that we both need to do roth conversions having at least $500 taxable conversion each(to create enough taxable income) to qualify for a joint filing credit. What would be more valuable would be a road map of what one needs to do to qualify for some of these items. Even with a CPA doing the taxes, if you don't know what to do during the year, you still miss out.