What are your taxes looking like?

[laurence]

So DW and I did our taxes with my parents ( having a Dad who's retired IRS has it's bennies). We found out we'll be getting back almost $11k! Normally we aren't this dumb, it usually clocks in at a $1,500 return from feds, about $400 owed to state. This time both are sending money back, and the Feds big time! The reason is DW started consulting last year (rather than being employed) and we were very conservative with her quarterly estimate checks ( don't want a fine!). Our plan is to use safe harbor from now on, but I have to tell you, it's a pretty intoxicating feeling to get a phat return! Unfortunately, it's all going to my graduate school or in her IRA. No Nintendo Wii for me

Anybody out there do the big return thing, even though you know it's loaning free money to the gubmint? Get an unexpected big return?

 

[vvsonikvv]

Just completed mine. Was nice and easy since I'm simple. No mortgage no children, none of that. Just a job. Got a little back.

I did owe $1 to state.

 

[Peaceful_Warrior]

I'm upset to be getting back over $5k this year between CA State/Fed. I declared 8 on both State/Fed, recently upped to 9 due to birth of a child. Now going to up to 10. I wish they had an 11.

I'd much rather owe $5k then get back $5k. No sense in giving them such a significant tax-free loan.

 

[Moemg]

Finished mine yesterday .I owe $1467. Not bad ! Funny story ,my late husband worked for the IRS and when I complained about not getting a refund he'd whip out his checkbook and write me a check for a refund .He had a great sense of humor .

 

[ERD50]

....when I complained about not getting a refund he'd whip out his checkbook and write me a check for a refund .He had a great sense of humor .

Whenever someone tells me they wish they were getting a bigger refund, I say 'Just give me $1,000 each month for 12 months. 15 months later, after you fill out a multi-page form asking for your money back, I will give it to you. Instant $12,000 refund!'.

Heck, I'd even put it in an escrow account - no risk on their part.

They look at me like I'm from outer space - they still don't 'get it'.

The other analogy I use - When you buy a pack of gum at the news stand, don't give the guy a ten and ask for the change back. Give him a $100 bill, and tell him you will be back for your change next April 15th. Do that every week and you will have a big pile of money due on the 15th. Whoppee, you get your own money back.

And they still don't 'get it'.

-ERD50

 

[Dog]

We got about $350 back - so we came pretty close to even.

 

[Meadbh]

I'm seeing my accountant tomorrow. I reorganized my finances following an inheritance and I know that in 2006 I had more taxable dividends and income than before, so I expect to be writing a cheque, amount TBA. My accountant and I always try to minimize the instalments I pay while avoiding penalties. Overpayment is effectively an interest free loan to the government and has an opportunity cost. Just try "withholding" it from them and find out the givernment's reaction to a loan in the other direction!

 

[LOL!]

We made some last minute (i.e. last week of December) moves to avoid AMT including big donations to charities. The consequence is that we overpaid our taxes and will use the overpayment towards 2007 taxes.

 

[Life_is_Good]

We just completed ours' yesterday using Turbo Tax Deluxe.

I knew this year would be very different from the past because it was the first full year we've been ER'd (meaning no W-2!). We Lived only off investment earnings and paid no taxes throughout the year on cap gains, divs, int, etc. We have no mortgage interest or enough other deductions so we used the "standard deduction". Truthfully, I was a bit scared to calculate the result

As it turns out, we owe just over 1 grand for both Fed and State combined. Not nearly as bad as I was expecting

While running through the Tax program, I came across a few issues that I would like to ask some of you who have been ER'd for a while.....

1) For one of my mutual fund redemptions, I was unable to obtain avg cost information from my brokerage. I've owned this fund for 15 years. It has been sold to 3 different brokerage houses over that time and has (of course) had many reinvested distributions - making a hand calculation very difficult. I suspect all the transaction history did not pass during one of the brokerage changes. What is the investor supposed to do when exact avg cost info does not seem to exist to calculate the cost basis?

2) For those of you living only off investment earnings, do you pay estimated quarterly taxes to Uncle Sam? It seems that most investors do not have taxes withheld from their distributions.

Much thanks in advance..... this forum is great for learning how to live in ER

 

[2B]

1) For one of my mutual fund redemptions, I was unable to obtain avg cost information from my brokerage. I've owned this fund for 15 years. It has been sold to 3 different brokerage houses over that time and has (of course) had many reinvested distributions - making a hand calculation very difficult. I suspect all the transaction history did not pass during one of the brokerage changes. What is the investor supposed to do when exact avg cost info does not seem to exist to calculate the cost basis?

2) For those of you living only off investment earnings, do you pay estimated quarterly taxes to Uncle Sam? It seems that most investors do not have taxes withheld from their distributions.

1) This was a problem with my FIL's lack of record keeping. You need to do the best you can at estimating it. If you have old tax records you might be able to get the value and number of shares on specific dates. You might get lucky and find out what year you bought your original share. Whatever you find document. Do the best you can and support it as well as you can. Put the numbers on your return like you've just written the 5th gospel. If audited, show the numbers you got and how you got them with a straight face. Ask if they can see any way you could have gotten a more accurate number. Also, do it with a straight face.

2) Your best bet is with quarterly payments based on your expected taxable income from all sources. A key point to remember is that you will not incur interest and penalties if you (a) pay 100% of the tax due in the prior year (not the amount that you had to send in on April 15 but the entire amount of taxes calculated on the return) or (b) pay 80% of the tax due in the tax year in question.

For my FIL I'm sending in 100% of last years taxes due no matter what I estimate. The money isn't that much different and I'd rather not have to worry about it until I do his taxes.

 

[NinjaPigeon]

I ended up owing about $8k, mostly due to a a lot of contract work. I didn't pay any quarterly taxes last year though, which is why the bill came in so high.

 

[newyorklady]

i don't even want to talk about it, my husband's job puts me in a much higher tax bracket. sucks.

 

[Gumby]

I must write a check to the IRS for 0.6% of the total amount of taxes for the year. Pretty darn close.

 

[shiny]

Where's the choice for I'm paying an obscene amount

 

[saluki9]

i don't even want to talk about it, my husband's job puts me in a much higher tax bracket. sucks.

Higher bracket = More income

explain to me how that sucks?

 

[CCdaCE]

Got $1,280 back from the Feds right away. I adjusted my withholdings, probably get $600 back next year -- can't quite get it fine tuned with my varying income.

Owe $16 to the State and have that to pay yet.

<snip>
The consequence is that we overpaid our taxes and will use the overpayment towards 2007 taxes.

This has always confused me. You "screwed up" and gave them an interest-free loan for one year, and now you're going to extend that to two years?

I realize it was a last minute/not calculated thing, but, sheesh!

-CC

 

[laurence]

I guess my poll wording wasn't exactly right, since ultimately, if you owe the largest amount possible without incurring a penalty you "got it right".

 

[Outtahere]

I haven't had mine done yet but the CPA I use has been right on the money with what I need to pay in estimated taxes. Usually all I have to pay 4/15 is that QTs ET and I expect it to be the same since there wasn't a big increase in either my salary or business income last year.

 

[JustCurious]

As with many things in personal finance, one must consider behavioural finance issues in addition to simple mathematics. I agree that getting a refund means that you gave Uncle Sam an interest free loan. However, in my opinion, I rather get a small refund (say less than 1k) than have to write a check on April 15. This is because it is difficult or impossible to fine tune your withholding in advance down to the penny so that you pay exactly what you owe and no more. Therefore, despite best efforts, you will end up paying a small amount or getting a small refund, and I prefer to err on the side of getting a small refund. I am willing to give Uncle Sam the free use of a few hundred bucks for up to a year and forego the few dollars of interest I might otherwise earn to avoid having to write a check on April 15. The few dollars of interest that I forego pay for themselves in the peace of mind that I feel knowing that I don't have to budget for a tax payment in April.

This logic only applies if the withholding is fine tuned down to a small difference, say $1,000 or less. If you are getting a refund of many thousands of dollars, then you should take the time to fine tune your witholding down to as close to your true tax liability as possible, without going over.

 

[CCdaCE]

As with many things in personal finance, one must consider behavioural finance issues in addition to simple mathematics. I agree that getting a refund means that you gave Uncle Sam an interest free loan. However, in my opinion, I rather get a small refund (say less than 1k) than have to write a check on April 15. This is because it is difficult or impossible to fine tune your withholding in advance down to the penny so that you pay exactly what you owe and no more. Therefore, despite best efforts, you will end up paying a small amount or getting a small refund, and I prefer to err on the side of getting a small refund. I am willing to give Uncle Sam the free use of a few hundred bucks for up to a year and forego the few dollars of interest I might otherwise earn to avoid having to write a check on April 15. The few dollars of interest that I forego pay for themselves in the peace of mind that I feel knowing that I don't have to budget for a tax payment in April.

This logic only applies if the withholding is fine tuned down to a small difference, say $1,000 or less. If you are getting a refund of many thousands of dollars, then you should take the time to fine tune your witholding down to as close to your true tax liability as possible, without going over.

Absolutely. Piece of mind and getting it "close" (like you said, less than $1k)

IRS Withholding Calculator. Hell, they'll help you get it "right"!

-CC

 

[TromboneAl]

For those of you living only off investment earnings, do you pay estimated quarterly taxes to Uncle Sam?

Yes, that's what you need to do. I'll make estimated tax payments that match exactly the tax that I paid last year. My tax will go up next year, due to Roth conversions, but as long as I paid 100% of my prior year tax, there can be no penalty.

 

[WRBT]

Owe $3700.

We claim 0 but two good earners no mortgage no kids no nuthin.

When I saw total I went into HR office and had an additional $100 taken withheld paycheck, that should get us closer.

 

[shiny]

Yes, that's what you need to do. I'll make estimated tax payments that match exactly the tax that I paid last year. My tax will go up next year, due to Roth conversions, but as long as I paid 100% of my prior year tax, there can be no penalty.

I'm quite certain it is 110%.

 

[SteveR]

We have not done them yet but I see no difference from last year when I owed $5k. I always pay state too since they have no penalty for under-withholding and no real provision for periodic payments.

Taxes for 2007 should be lower due to only working part of the year and using exiting funds for living expenses with a small pension as income. Next year will be mostly capital gains taxes as I start cashing in my equities in my after-tax accounts. That cycle should continue for 3-4 more years until I sell down the pile and balance the dogs and cats along the way.

I hates taxes.

 

[LOL!]

I'm quite certain it is 110%.

110% is for folks of a certain income level. 100% works for most folks.