Tax Time

[martyp]

I filed my 2018 taxes today. I screwed up my withholdings last year and now I’m getting a hefty refund. I usually aim for nothing owed/no refund. However, the big prediction after the Republican tax cut was that people were going to be surprised by much lower refunds if they didn’t check the new withholding rates. I’m curious if that prediction holds true. It would be the kind of news that could feed the election discussion.

 

[DrRoy]

The prediction mainly relates to people who pay high state/local taxes that are now not fully deductible.

 

[martyp]

The prediction mainly relates to people who pay high state/local taxes that are now not fully deductible.

There is that but they also lowered the automatic withholding rate to make it seem like normal people were seeing some benefit of the tax cut legislation. Or . . . maybe not. Just asking an informal poll if people are seeing that (possible) effect.

 

[Philliefan33]

There is that but they also lowered the automatic withholding rate to make it seem like normal people were seeing some benefit of the tax cut legislation. Or . . . maybe not. Just asking an informal poll if people are seeing that (possible) effect.

We have no significant W-2 income (just a few $K from my summer hobby job), so no significant change in our withholding. DH adjusts the withholding from his pension each year, sometimes more than once, to cover our estimated income tax liability.

 

[jazz4cash]

We're in a high SALT state and we paid a bit more in taxes due to the loss of deductions. The big hit was being underwithheld since DW did not make any adjustments. It was not a surprise for me as it may be for many others.

I've never had much luck getting the withholding right with the standard W4 calculation so in the past I always calculated back from the result I needed.

 

[lemming]

The new tax law does not seem to value home ownership,charitable deductions,support for local schools-roads-security(SALT_) or family support-ie the loss of personal exemptions. The family credit is small and temporary. I follow and sometimes post on a tax website and it has caused confusion. The child tax credit is only partially refundable so it is not such a benefit to lower income people .
This was my 'off year' where I kept my income down so that my social security is not taxable so I will not have a tax liability this year for the feds. Depending on where I take out my money for this year I should be tax free again this year.

 

[Montecfo]

We're in a high SALT state and we paid a bit more in taxes due to the loss of deductions. The big hit was being underwithheld since DW did not make any adjustments. It was not a surprise for me as it may be for many others.

I've never had much luck getting the withholding right with the standard W4 calculation so in the past I always calculated back from the result I needed.

It is designed to over-withhold.

To tie your tax liability, you have to back into the required number of allowances, or withhold a flat amount (most payroll systems allow this, your payroll administration may or may not).

 

[frayne]

The new tax law does not seem to value home ownership,charitable deductions,support for local schools-roads-security(SALT_) or family support-ie the loss of personal exemptions. The family credit is small and temporary. I follow and sometimes post on a tax website and it has caused confusion. The child tax credit is only partially refundable so it is not such a benefit to lower income people.

Ditto, pretty much smoke and mirrors IMHO. Hope those who adjusted their withholdings to a lesser amount at the beginning of 2018 don't get any surprises.

 

[VanWinkle]

Here is a good comparison of the prior child tax credit and the new child tax credit. The idea that we regressed is not supported by the facts.

https://www.thebalance.com/child-tax-credit-changes-4158690

 

[HillCountry]

I am doing way better with the new tax. This is the first year for a long time that I don’t have AMT. 1/3 of my income is from long term capital gain. I am not penalized for this now.

 

[mountainsoft]

I filed my 2018 taxes today. I screwed up my withholdings last year and now I’m getting a hefty refund.

We filed ours yesterday and are getting a $2310 refund this year.

Usually we get about 3500 or so back from income taxes that we apply to our property taxes. I know it would make more financial sense to get a smaller refund and earn interest on that money, but it's always been a pain free way to help pay our property taxes.

This year I converted about 10K from a traditional IRA to a Roth, and we had a fair amount of interest income from various new savings accounts. So we owed a bit more in taxes.

Thankfully, our property taxes are about $600 less this year (4400 instead of 5000).

However, I had to laugh at the new "postcard" sized return. Instead of a two page return with a couple of extra schedules, we now had multiple schedules for the items that would have fit on the original form. Yeah, really simplified. Of course, we file online and didn't even see the forms till we were done entering all of our info. So it doesn't matter to me what the final forms look like.

 

[scrabbler1]

However, I had to laugh at the new "postcard" sized return. Instead of a two page return with a couple of extra schedules, we now had multiple schedules for the items that would have fit on the original form. Yeah, really simplified. Of course, we file online and didn't even see the forms till we were done entering all of our info. So it doesn't matter to me what the final forms look like.

I had to laugh at the way Form 1040 got chopped up into multiple schedules, sometimes containing a single number transferred from another form or schedule which then got transferred back to Form 1040. I will have to include Schedules 1, 2 (which has exactly 3 lines on it!), and 5, along with Schedules B, D, and forms 8949 and 8962. That's 8 pages. And the instructions say I can't cut the sheets with lots of blank space on them to save space. Postcard, my a$$! I'll need a manila envelope instead of a regular one to mail the dang thing out!

And my taxes will be about 4% higher thanks to the changes. The lower rates save me nearly nothing, while losing the personal exemption increases my taxable income, and taxes due rise by about $140.

Pretty bad deal all around.

 

[pb4uski]

Compared to last year, we are a mixed bag. In 2017, 49% of our income was qualified dividends or LTCG... with that income structure then we would have paid 18% more in tax under the new tax law because of SALT limitations exceeding the benefit of lower rates.

However, in 2018 we shifted from living off of taxable to living off of tax-deferred. Total income was about the same, but we had much more ordinary income and only 18% of our income was preferenced income. We paid more overall tax, but 12% less in tax that what we would have paid under the 2017 code with the same income and deductions.

My federal return is all set to go but our state made some major changes in taxes in response to the federal changes and their forms are not yet ready.

 

[jazz4cash]

It is designed to over-withhold.



To tie your tax liability, you have to back into the required number of allowances, or withhold a flat amount (most payroll systems allow this, your payroll administration may or may not).

I would expect it to be designed to over-withhold but my experience was the exact opposite. As you suggested and I stated earlier I had always backed into the level of withholding to get pretty close to our actual tax liability. I had an additional flat amount withheld. DW is the breadwinner now since I am RE and she refused to adjust withholding. So I guess we got a free IRS loan this year but we were awfully close to a penalty for being under-withheld.

 

[TrvlBug]

I am doing way better with the new tax. This is the first year for a long time that I don’t have AMT. 1/3 of my income is from long term capital gain. I am not penalized for this now.

+1. Our tax man ran a what if using new tax after we filed 2017. Our SALT deductions decrease from ~$25K to $10K, however, due to no AMT we're about $1K better. Additionally, starting next year, we'll use QCDs for our charitable contributions rather than the DAF, providing additional tax savings.

 

[PatrickA5]

I've done my TurboTax allotment of 5 tax returns for family and friends. All got a higher refund than last year despite the changes to the WH tables. For my kids this is a good thing as they would have spent the extra money if they had it. My refund is higher, but I knew that going in as I didn't do quite as much conversions as I had planned.

 

[Car-Guy]

Just finished mine this weekend too. I'm getting back just over $1500 which is pretty close for a return that's over 1/2m. I probably won't actually file for another few weeks since I always seem to find something else to add/change.

Interesting, they changed the basic Turbo Tax 1040 long form to one page instead of the two pages they have had for years and you sign your name in the top/middle of the page.

 

[albundyz]

Filing taxes for free

I like to file electronically. I like to file for free. I have an easy tax return. I am retired with only SS income and an IRA distribution. So, I go to the Turbo Tax File-For-Free thing. I fill out all the forms. I complete everything and go to file and Turbo Tax basically says "You cannot use the Free version, you must upgrade to the Deluxe Version" why? cuz my return includes Schedule 5. What is that? It's the form where you declare your 2018 pre-paid estimated taxes. Well, I don't work, I HAVE to estimate my tax liability. ok, I leave Turbo Tax. I go to TaxAct. I use their file-for-free software. I enter all the data. I go to file and they say "You must upgrade to the Deluxe Version because you use Schedule 5." Huh? ok, I go to H/R Block, use their file-for-free software. I enter all the data and hold my breath. H/R Block says "Congrats your tax return has been sent electronically". No cost. My return was accepted by both Fed and State. What am I missing? Where did I go wrong? I don't understand why I can file for free at H/R, but I can't at TurboTax and TaxAct.

 

[Car-Guy]

TT is well known for their Bait and Switch tactics.

 

[cathy63]

I like to file electronically. I like to file for free. I have an easy tax return. I am retired with only SS income and an IRA distribution. So, I go to the Turbo Tax File-For-Free thing. I fill out all the forms. I complete everything and go to file and Turbo Tax basically says "You cannot use the Free version, you must upgrade to the Deluxe Version" why? cuz my return includes Schedule 5. What is that? It's the form where you declare your 2018 pre-paid estimated taxes. Well, I don't work, I HAVE to estimate my tax liability. ok, I leave Turbo Tax. I go to TaxAct. I use their file-for-free software. I enter all the data. I go to file and they say "You must upgrade to the Deluxe Version because you use Schedule 5." Huh? ok, I go to H/R Block, use their file-for-free software. I enter all the data and hold my breath. H/R Block says "Congrats your tax return has been sent electronically". No cost. My return was accepted by both Fed and State. What am I missing? Where did I go wrong? I don't understand why I can file for free at H/R, but I can't at TurboTax and TaxAct.

You did not do anything wrong. H&R Block just chose to include more forms in their free version than the other companies. I just read this article from Wirecutter that discusses the differences between the different packages: https://thewirecutter.com/money/best-tax-software/

 

[cathy63]

Just finished mine this weekend too. I'm getting back just over $1500 which is pretty close for a return that's over 1/2m. I probably won't actually file for another few weeks since I always seem to find something else to add/change.

Interesting, they changed the basic Turbo Tax 1040 long form to one page instead of the two pages they have had for years and you sign your name in the top/middle of the page.

TurboTax just reproduces the actual IRS form. Congress and the President wanted a postcard sized form, so the IRS obliged by cutting the old 2-page 1040 into 8 pages (one form and six schedules) that are mostly blank space.

 

[jimandthom]

In past years our deductions were averaging 20 -25K depending mostly on medical and charitable donations to our alma mater and we also took 2 exemptions.

The loss of 2 exemptions but reduced tax rate from 19K- 77K is probably a wash. Haven't done the math tho.

Overall probably a big "meh" for us.

 

[retired1]

Has anybody used Credit Karma to file taxes? I've always paid to get TurboTax. I was thinking about Credit Karma service. Any feedback ?

 

[sengsational]

I finished my taxes in December, just going through the software interview as usual. Then I set the withholding percent accordingly when I pulled from my retirement account. I didn't notice and wouldn't notice if there were tax law changes. Nothing I can do about it and so something I don't bother thinking about.

 

[SheitlQueen]

Finished up and efiled last week. I don't pay state or federal taxes and am actually getting back $295 on overpayments for ACA premiums.