Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Old 10-29-2013, 05:10 PM   #21
Thinks s/he gets paid by the post
redduck's Avatar
 
Join Date: Mar 2005
Location: yonder
Posts: 2,059
I'm back. And, I have one last (?) question(s).

The facts once again:

Next year I'll be 70 1/2
Single; No mortgage, no dependents
Self-employed

Income:
$ Interest: $1000
Dividends: $8000 qualified; $8000 unqualified
SS Benefits: $26,000
RMD: $$26,000
Net Income from job next year: $0-$35,000. ( I have my choice of working very part-time, or very-very part-time, or not working at all).

If I understand Taxcaster, even if I don't work, I will still be in the 25% tax bracket.

It seems that I can actually earn up to $35,000 from work and still be in the 25% tax bracket. I don't want to earn even close to that amount.

I still don't quite get when I get hurt regarding social security--that is, when I get taxed on 85% of what SS pays to me. And, is it actually a significant amount of dollars?

pb4uski has stated that I will be paying the federal government about 37% of my income in federal taxes. Then, California State taxes get added (thanks for that REWahoo). Guess that puts me at about 40%. And, have we included self-employment taxes yet? (I think we are as per Taxcaster) (I was a bit confused on this).

Anyhow, if anyone can sort of figure out how much total taxes (in terms of actual dollars) I would pay if I had a net income of $20,000 net from work plus the income mentioned above ($69,000, I think) and then again at $35,000 net from work, plus the income mentioned above ($69,000, I think), I sure would appreciate it.
I do have figures from Taxcaster, but I figure the odds are I didn't get it exactly right.
__________________

__________________
redduck is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 10-29-2013, 07:04 PM   #22
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
pb4uski's Avatar
 
Join Date: Nov 2010
Location: Vermont & Sarasota, FL
Posts: 16,432
Here is what I came up for federal income and self employment taxes using Taxcaster and the data you provided.

No self employment income $8,535
$20k self employment income $15,999 (increase in taxes is 37.32% of $20k)
$35k self employment income $21,605 (increase in taxes is 37.34% of $35k)

Then add another 4.4-6.4% for California, so you're looking at a tax burden (including self employment taxes) in the vicinity of 41-43% on your self employment earnings. I probably wouldn't work knowing that much of what I earn is going to taxes.
__________________

__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.
pb4uski is offline   Reply With Quote
Old 10-29-2013, 07:39 PM   #23
Thinks s/he gets paid by the post
target2019's Avatar
 
Join Date: Dec 2008
Posts: 3,708
One possible gainer in your favor is if you contribute to some type of retirement account. If you have a SEP-IRA, you could achieve a tax credit for some of your self-employment profit. Not familiar with other options, but probably different type of plan would let you put away larger amount.

With Intuit ProSeries I calculate $5,127 Fed inc tax., no self employment.
$20k self emp, $13,806.
$35k self emp, $19,135.

With a SEP contribution of $6505 for the year (based on $35k profit), you would have tax bill of $16,835.

Also, you need to make estimated payments to avoid a penalty.
__________________
target2019 is offline   Reply With Quote
Old 10-29-2013, 08:01 PM   #24
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
pb4uski's Avatar
 
Join Date: Nov 2010
Location: Vermont & Sarasota, FL
Posts: 16,432
I'm surprised the results differ so much. I wonder why since they are both Intuit products.
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.
pb4uski is offline   Reply With Quote
Old 10-29-2013, 08:06 PM   #25
Thinks s/he gets paid by the post
target2019's Avatar
 
Join Date: Dec 2008
Posts: 3,708
Quote:
Originally Posted by pb4uski View Post
I'm surprised the results differ so much. I wonder why since they are both Intuit products.
This was 2012 taxes calculated. I used single, 70 years old.
__________________
target2019 is offline   Reply With Quote
Old 10-29-2013, 08:18 PM   #26
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
pb4uski's Avatar
 
Join Date: Nov 2010
Location: Vermont & Sarasota, FL
Posts: 16,432
Ran same numbers with Taxbrain; 8.711, 15,856 and 21,223 so broadly similar to TaxCaster.
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.
pb4uski is offline   Reply With Quote
Old 10-29-2013, 08:19 PM   #27
Thinks s/he gets paid by the post
target2019's Avatar
 
Join Date: Dec 2008
Posts: 3,708
I had used $1,000 less for the RMD and SS for the year. I corrected results in my reply above. The tax is somewhat higher in all cases.
__________________
target2019 is offline   Reply With Quote
Old 10-29-2013, 09:46 PM   #28
Thinks s/he gets paid by the post
redduck's Avatar
 
Join Date: Mar 2005
Location: yonder
Posts: 2,059
Quote:
Originally Posted by target2019 View Post
One possible gainer in your favor is if you contribute to some type of retirement account. If you have a SEP-IRA, you could achieve a tax credit for some of your self-employment profit. Not familiar with other options, but probably different type of plan would let you put away larger amount.

With Intuit ProSeries I calculate $5,127 Fed inc tax., no self employment.
$20k self emp, $13,806.
$35k self emp, $19,135.

With a SEP contribution of $6505 for the year (based on $35k profit), you would have tax bill of $16,835.

Also, you need to make estimated payments to avoid a penalty.
I do have both a Roth IRA and a SEP-IRA (along with an Traditional IRA).
So, could I continue to put money into both the Roth IRA and the SEP-IRA if I continued to work? (I thought I had to take the RMD out of the SEP-IRA).
__________________
redduck is offline   Reply With Quote
Old 10-29-2013, 10:05 PM   #29
Thinks s/he gets paid by the post
target2019's Avatar
 
Join Date: Dec 2008
Posts: 3,708
Quote:
Originally Posted by redduck View Post
I do have both a Roth IRA and a SEP-IRA (along with an Traditional IRA).
So, could I continue to put money into both the Roth IRA and the SEP-IRA if I continued to work? (I thought I had to take the RMD out of the SEP-IRA).
The Roth IRA + IRA is 6K max. If you have earned income, then can contribute. I put in 6K for your Roth, and it was not limited.

The SEP-IRA is separate contribution, and is based on your Self Employment profit.

If you are in RMD territory for the IRA, then same goes for the SEP-IRA. But you can still contribute if meeting the requirements.

But all standard disclaimers apply. This is not tax advice.

If you had a copy of Turbotax home and business installed, you'd have better understanding of all this. You could plug in different numbers and decide for yourself if you want to stay in the working game. I admit I can't see myself not staying invloved in some way with self employment. But after starting SS, I will definitely scale back to stay under certain tax limits.
__________________
target2019 is offline   Reply With Quote
Old 10-29-2013, 11:12 PM   #30
Thinks s/he gets paid by the post
redduck's Avatar
 
Join Date: Mar 2005
Location: yonder
Posts: 2,059
Quote:
Originally Posted by target2019 View Post
<snip>... I admit I can't see myself not staying invloved in some way with self employment. But after starting SS, I will definitely scale back to stay under certain tax limits.
Yes, I completely understand this is not tax advice.

Why would you stay in the working game if self-employed?
__________________
redduck is offline   Reply With Quote
Old 10-30-2013, 05:07 AM   #31
Thinks s/he gets paid by the post
target2019's Avatar
 
Join Date: Dec 2008
Posts: 3,708
Quote:
Originally Posted by redduck View Post
Why would you stay in the working game if self-employed?
I will try to stay self-employed at a minimal level, say 10-15K per year. I will be able to use this income to pay for a few toys and real estate taxes. Whether the self-employment market wants me will be another story. I have a few skills in demand,.
__________________
target2019 is offline   Reply With Quote
Old 10-30-2013, 08:03 AM   #32
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
pb4uski's Avatar
 
Join Date: Nov 2010
Location: Vermont & Sarasota, FL
Posts: 16,432
I don't think I would bother with self employment if I had "enough" (eg; 100% success rate with Firecalc) and knowing that such a high portion of my self employment efforts were going to the government. I don't recall what you do redduck but I have a friend who is retired, has more than he needs and just does some work here and there for cheap or free to help people out. He hates paying taxes.
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.
pb4uski is offline   Reply With Quote
Old 10-30-2013, 09:13 PM   #33
Thinks s/he gets paid by the post
redduck's Avatar
 
Join Date: Mar 2005
Location: yonder
Posts: 2,059
Quote:
Originally Posted by target2019 View Post
I will try to stay self-employed at a minimal level, say 10-15K per year. I will be able to use this income to pay for a few toys and real estate taxes. Whether the self-employment market wants me will be another story. I have a few skills in demand,.
Quote:
Originally Posted by pb4uski View Post
I don't think I would bother with self employment if I had "enough" (eg; 100% success rate with Firecalc) and knowing that such a high portion of my self employment efforts were going to the government. I don't recall what you do redduck but I have a friend who is retired, has more than he needs and just does some work here and there for cheap or free to help people out. He hates paying taxes.
I like the idea of working two half days a week so I can buy stuff that's a notch better and feel good about it. For example, it's the difference in buying a generic HVAC or getting a Lennox HVAC. Anyhow, I have found over the years I do make mistakes in buying things and working helps alleviate some financial mistakes (big and small). Additionally, I'm not very handy (even though I have three hammers). I pay to get things fixed. Paying for help gives me a sense of freedom, even if I have to work for that freedom. I'm definitely not a DIYer, except when it comes to financial investments (i.e. stocks and mutual funds). Why I think I can do that, I don't know.

I don't hate paying taxes, but perhaps I could learn. I know I won't like paying taxes at high rate. Luckily, my work is often enjoyable and isn't especially stressful. Occasionally I feel I'm overpaid. (I'm not sure that's such a good thing to feel).

As to working next year: I still don't know. For me, it has a bunch of pros and cons (o.k., o.k a few pros and cons). But, now I have helpful information to allow me to make a better informed decision.

What I will hate is, giving up the one big pro: my favorite tax deduction of $8,500--that of my Platinum executive membership to the Early Retirement Board. The Platinum membership apparently comes with a pair of monogrammed pajamas which I have not yet received. Andy, you want to get on that?
__________________
redduck is offline   Reply With Quote
Old 10-30-2013, 10:01 PM   #34
Full time employment: Posting here.
Al in Ohio's Avatar
 
Join Date: Jun 2013
Location: Columbus OH
Posts: 688
A Lennox is a generic HVAC!

Sub par to a Trane or Carrier unit IMO
__________________

__________________
Ohio INTJ ENG ER Hopeful
Al in Ohio is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


 

 
All times are GMT -6. The time now is 08:19 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.