Pleasant Tax surprises this season?

[TimSF]

Just finished my taxes this past weekend and caught an unexpected and pleasant surprise - the Retirement Saver Credit -- as I was working through the Turbotax categories. Before I ERd in 2013, I had for years been in the top tax bracket, so most of my tax surprises were of the unpleasant variety. Now, with annual total income of about $40k, lovely tax credits have come into view - the ACA credit, Tuition tax credit (my spouse has gone back to school), and the Retirement Saver Credit (up to $2000 credit on IRA contributions, which I had not even known about). How advantageous to have a middle class income again. (Full disclosure: I itemized my deductions in 2014, probably for the last time, because I still had a mortgage interest deduction and some carryover charitable contributions. These helped reduce my income tax bill to 0.)

Anyone else experience a 'nice' surprise this tax season?

 

[ejman]

My pleasant surprise this season is that the TurboTax shenanigans pushed me into investigating other tax software and I discovered that TaxAct works just fine at a fraction of TT cost.

 

[Theseus]

My pleasant surprise was to get a better peek under the hood and see how the PTC plays out. Working the first half of 2014 our income was too high to take advantage of it, and we used COBRA for the balance of the year anyway, but being on an exchange policy for 2015 I now know how things should pan out for 2015 provided no major hiccups.

 

[Dash man]

Nope...nothing pleasant about taxes I can think of.

 

[athena53]

Well, I guess it was that the state where I worked got the refund to me before I had to send those $$, plus another $1,500, to the state where we live.

 

[FIREd]

Nope, no pleasant - or unpleasant- surprises. Just the realization that I should really simplify my investments.

 

[Ronstar]

I had a bad surprise, then a good surprise. First I noticed that DW had a total of $1200 Fed tax withheld from her pension for the 4 months that she was retired in 2014. Seemed way low to me, but then we ended up with a refund of $1300.

 

[Meadbh]

I am expecting a big refund. I had expected something, because I paid a lot in installments last year, due to a nonrecurring bonus in the previous year, but I had not expected a 5 figure refund with no installments to pay this year. So I splurged and joined my local golf club.

 

[sunnysideup]

I downsized jobs in late 2013 and my income dropped substantially as a result. 2014 was the first year in about 10 years that we did not get hit with the AMT. This was a nice surprise. DH couldn't believe it, he asked me several times, "Are you SURE?".

 

[photoguy]

I always dreaded doing taxes because invariably any refund we would have gotten would get eaten up by taxes on capital gains / dividends from our taxable accounts (and even worse, we might have to write a check).

We weren't in the highest tax bracket, but high enough that the marginal rates seemed punishing especially with california state rates.

However, in 2014 we fired early in the year to minimize taxes. Although we expected to see some refund, it was still a somewhat of a surprise to see how large it was. This is going into our travel fund and will pay for 1-2 nice international trips :->

 

[ownyourfuture]

I had a combination pleasant/unpleasant situation.
But it wasn't a surprise.

Kinder Morgan changed from a 'limited partnership' to a conventional stock late last year. Because I held through the conversion, I took a big hit on my taxes.

The pleasant part. No more K-1 forms ever

 

[rayinpenn]

Bad news: huge I mean huge check to the IRS
Good news: A healthy dividend stream was responsible for the tax.


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[MichaelB]

Bad news: huge I mean huge check to the IRS
Good news: A healthy dividend stream was responsible for the tax.

Dividends are a predictable income stream, so it should be pretty easy to project the full year tax liability and pay the quarterly estimated tax. What went wrong?

 

[rayinpenn]

Nothing went wrong - Why would I want to give the government my money any earlier than I can? It's writing that check that kills me.

In truth I tapped some taxable dividends for my daughters tuition. I'll adjust my withholdings accordingly this year.


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[MichaelB]

Nothing went wrong - Why would I want to give the government my money any earlier than I can? It's writing that check that kills me.

Well, the thread title is "tax surprises", and most forum members would rather pay accurate estimated quarterly taxes and avoid penalties and interest, and also large refunds.

 

[braumeister]

Refund from the state was slightly larger than the amount I owed the Feds.

 

[Golden sunsets]

Nice surprise-thought we would owe (and planned for) the 3.8 percent Medicare tax on investment income and Capitol gains, but our accountant just informed us that the tax is not applicable to capital gains derived from a business that the taxpayer owns and is active in. Hit by the AMT and reduced exemption but can't complain about having too much income to avoid the AMT.

 

[pb4uski]

No surprise, but for the first time I slightly overconverted on my Roth conversions by about $500 and was unwilling to pay the extra $150 in federal tax so I recharacterized the excess and my taxable income was exactly equal to the $73,800 top of the 15% tax bracket.

 

[LRDave]

This has actually been a pleasant and productive tax season for me (given the circumstances).


1. 2014 was the first full year where over-50 educator DW maxed out both 403(b) and 457(b) - making her income a pittance. I had figured for a small fed refund to offset the small payment I knew we would make to our state. Our fed refund turned out to be a bit better than small and funded a nice and much-needed 2-day getaway for us during DW's spring break last week.


2. By far the best thing about this tax season was me educating myself on all the tax-related issues of early retirement - and the benefits if you play the "MAGI game" (as I saw it referred to on Bogleheads) well. I had avoided pricing ACA in our retirement area because I was afraid of the answer but I was pleasantly surprised for a Silver HDHP plan. I also finally figured out what our SS options will look like.


Retirement is likely 2 years away and the rules could all change between now and then, but DW and I have a much better feel for how we can manage the years between retirement and Medicare and it looks better than I feared/budgeted. (Leaving the budget as-is for now.)


No real change in tactics as related to my enlightenment, except to dial back my fed W/H a bit. We will continue to max out 401(k)/403(b)/457(b) and pray ACA remains available and affordable.

 

[scrinch]

Surprise...2014 was the first tax year in a long time where I didn't end up with a net refund. Owed just a little over $1000, so not bad.

Then in January Medtronic, where DW worked for years, closed a deal where they acquired an Irish company and moved the parent company to Ireland. The good news was that they will save a bunch in taxes. The bad news is that for shareholders it was a taxable event, so we will be paying about $10000 next year for the privilege of remaining shareholders of Medtronic (plc instead of inc).

 

[imoldernu]

Surprise? For many and varied reasons, we have not paid income taxes for the past 24 years, and the simplicity of our financial status has kept us below the taxing level since the day we retired. Goverment bonds, IRA's and deferred annuity tax advantages greatly simplify our lives. Tax preparation takes about 1/2 hour for state and federal taxes, and the historical info fromTaxAct makes filing a non event.

We did make an early-on mistake for 2 years, when we turned 65, by not taking out some smaller investments, up to the exempt limit. With Social Security as a base and IRA withdrawals, the actual cash flow keeps us under the taxable limits.

We never planned it this way, it just happened. As we go forward, there will be some taxes, but this hapens at the same time our spending has gone down and spending needs decreased. Looking ahead to soon becoming a nonagenarian, we'll eventually pay some taxes, but overall, we are very grateful for the current US tax structure as it is designed to treat those with middling incomes.
............................
Adding a thought for those who could have parents who are in a similar "no tax" situation. Theoretically, not owing taxes, per se, would not require a person to file taxes....
EXCEPT... that not filing, implicitly allows the government to file for you. When the government does that, it assumes ONLY the standard deduction, and no other deductions. ie. single return, not joint, and no other exemptions suchas over 65, blind, etc.

You may want to read this article on the legal points involved.
https://www.legalzoom.com/articles/what-are-the-penalties-for-not-filing-taxes

What if you fail to file?

The IRS may file what is known as a substitute return for you. However, as you well know, the IRS will not be looking to save you any money. In fact, a substitute return will not include any of the standard deductions your accountant would typically include in your return. Case in point, a substitute return only allows one exemption: single or married filing separate, so you end up with higher tax liability than if you would have just filed.

 

[Jack_Pine]

Still working so Pleasant and Tax does not go in the same sentence for me.

Had to take some money out of the business this year and hit the new Affordable Health care tax. That was a very unpleasant surprise.

 

[Surewhitey]

We too got the savers tax credit and got direct deposit of our "managed return" in one week...

 

[big-papa]

My nice surprise is that my planning was about right! Went back to work in June last year. Found a website with spreadsheets for income tax planning. Knew I'd have to pay back my subsidies for Obamacare insurance and knew I wouldn't contribute to a 401K again until 2015 as I was getting the emergency fund replenished after 10 months off work. So, knowing my income, deductions and previous years' cap gains and interest/dividends, I was able to adjust my W-4 with-holdings accordingly and am getting back a small refund. I consider +/- $4K return/owe in any given year a success and this was well under that. Plus I refuse to file quarterly, choosing instead to adjust with-holdings at work. When I finally do ER, though, will have to reconsider that!

 

[Fermion]

No surprise here, although we paid almost 3x in federal tax this year what our total gross income will be next year.

Next year Uncle Sam gets a surprise when I take some of it back out of his pocket! muah hah hah