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Old 04-05-2010, 05:39 PM   #121
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1) I didn't want to pay the money for the tax programs, so did it all by myself using the pdf forms and manuals from the IRS
2) I'd forgotten the iterative nature of calculating the taxes so if you make a mistake or are missing some information in a previous sum, it ripples through the rest of the forms - ACKKKK!
3) If you have a small mortgage and no other deductions to speak of, you will be using the standard deduction - I haven't done that in.....oh gosh, I don't know how many years.
4) If you have foreign income, you will only be given a tax break on it as if it was a single income (i.e. at the lower bracket, not at your final bracket), and calculating your final tax, if you also have qualified dividends is a PITA.
5) Being off on any of your estimated taxes can have serious consequences - why they penalize you for an *estimate* is beyond me. Seems to me they want you to 'overpay' so they can use the money and then give you less back (especially if you would have invested that extra). I will be paying a bit more this year on my self-employment income - oh and when your investments start to kick in more income, the estimated taxes become more important as well. Juggling all of the different taxes is mind-boggling.
6) Thank goodness I no longer have state taxes....especially a very expensive state.
7) Whoever writes the forms and how you calculate the different lines on the forms must be crazy. I think they purposely write it that way so you don't see the different equations and how they monkey-rig the system (see foreign taxes and qualified dividends above). After going back and forth among three different worksheets and forms, I figured out what they were doing - of course it's like gambling in Vegas, the odds are in favor of the house - in this case the IRS.....
8) I may do my taxes this way again - we're going to run the numbers against an on-line program to see how we did and if it works out well, the stubby pencil, calculator and eraser method may be our in the future for awhile. As I said before, it allows me to see what my federal government is doing to me.....and how much of my money they would like to extract from me.
9) Being in business for yourself certainly makes you see how much in taxes are paid - the first 15.3% is the full social security/medicare hit (self-employment taxes they call it). After that it's federal income taxes - I see now why prices can be so high - especially when you are paying up to 50% of what you make in taxes - i.e. you don't see it.
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Old 04-05-2010, 05:56 PM   #122
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Well, so far I have learned that you can eFile for an extension!

That's handy!

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Old 04-06-2010, 01:57 AM   #123
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Originally Posted by jebmke View Post
Why are you taking short term capital gains??
I'm living off of options trading, and usually sell 1 to 2 months out, sometimes as much as 6 months, but vary rarely anything over a year. I've gone back to 2006 and compared monthly the returns, and while they fluctuate wildly, month to month, over a year, or over multiple years, they are fairly consistent. The percentage rate is high enough that it beats anything else I can do, I just have to deal emotionally and financially with the paying of the income taxes.
Long answer, but felt the additional was needed to provide an understanding.
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Old 04-06-2010, 04:45 AM   #124
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1)
9) Being in business for yourself certainly makes you see how much in taxes are paid - the first 15.3% is the full social security/medicare hit (self-employment taxes they call it). After that it's federal income taxes - I see now why prices can be so high - especially when you are paying up to 50% of what you make in taxes - i.e. you don't see it.
You are 100% correct that being in business shines a light on many things.

You do get to deduct 1/2 of your self-employment tax above the line. So you are not really paying the tax fully. If you're paying 50% of your income in taxes, it might be too high. Our effective tax rate was 6.84% this year, and we're in the 25% tax bracket.

When my business income was higher, I looked forward to year's end, and tax time. At year end you do preliminary taxes, and see how much to spend on Sec. 179 deductions, etc. before Dec. 31. After doing the taxes early Feb., you decide how much to put into retirement account, and reduce your taxes further.

These I still enjoy, to a lesser extent, but certainly things that regularly-employed citizens can't see.

Those estimated taxes are a real pain. You avoid penalties by paying 100% of the previous year's taxes. If you look at things closely on a quarterly basis, you can tell if it's enough, or too little. Still, it is best to make the 4 payments and cover 100% of previous year's taxes. Then file in early Feb. and get the excess back as soon as possible.
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Old 04-06-2010, 05:54 AM   #125
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Those estimated taxes are a real pain. You avoid penalties by paying 100% of the previous year's taxes. If you look at things closely on a quarterly basis, you can tell if it's enough, or too little. Still, it is best to make the 4 payments and cover 100% of previous year's taxes.
That's what I do. It's lazy, but I just divide up last year's amount into 4 payments and send them in on time via EFTPS. In March when I do my taxes I'll either have to scratch around to come up with some extra money to send in, or I'll get some money back, but I'll never have to pay a penalty.
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Old 04-11-2010, 05:19 PM   #126
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I re-discovered that I have absolutely no idea how the IRS calculates any of its arcane rules. BY rights, I should have owed them about $1500 due to some capital gains taxes. But the H&R block program assured me that the Feds actually owed me. After you took in those special right to work credits and other credits, I didn't owe them anything.

But the state tax people recognized right away that my capital gains tax was extra income that I'd not paid taxes on, and assessed me for the money. It was a wash between the refund and the increased state taxes.

H&R Block generates so many forum(18) for the feds I'm sure they'll just pass it on.

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Old 04-13-2010, 07:37 PM   #127
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Those #%&^**#$ revised 1099's just keep coming !
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Old 04-14-2010, 12:08 AM   #128
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I learned not to mail the State forms to the Feds. Now I don't know whether to send the real set of Fed forms to the Feds or wait for them to tell me I didn't include all the forms. Luckily I hadn't mailed in my State forms yet, so I will get them the correct set of forms.

And I thought I was so organized...
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Old 04-14-2010, 06:07 AM   #129
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One year I failed to send in my w-2 forms. Made no difference at all, they didn't care. I guess they just looked them up or believed what I wrote. I got my refund like clockwork anyhow.

One nice thing about these HNR block type programs is that its really hard to cheat, and most people just fill in the blanks of what the program asks for because the code is too complicated. I had 18 pages of documents to send in with my return.

And I will never ever file electronically until the require it no matter what.
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Old 04-14-2010, 10:05 AM   #130
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OK, I blasted back north in time to get my taxes done.

I learned that the tax rate on recapture of depreciation is not taxed at the typical higher rate for property which you also occupy as a home. This reduced my liability for federal income taxes below what my guess was. Very interesting.

I knew that forgiveness of indebtedness income (which I have from a real estate LLC where the mortgage was renegotiated) can be delayed for five years and then spread out over five years for federal income taxes, but must be taken in the year it occurred for Minnesota income taxes. As a result, I paid almost twice the amount in state income taxes than I did in federal taxes this year.

Blech. Where is the teaparty? Just kidding. Really.
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Old 04-14-2010, 01:42 PM   #131
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I have been trying to predict my taxes for 2010 and the H&R Block at Home program wants to know what's in box xxx on form xxx that I don't have! Driving me nuts. I'm retiring in July so I kind of need to have an idea of what counts where and then there are those lovely estimated taxes.... based on what...

For whoever said they did them on paper - LOL! That's why I pay the $ for the program every year. I usually wait until they offer Norton AV free with it, or something like that.

I should start a new thread - how do you estimate taxes when you worked part of the year and converted an IRA to a ROTH...

Answers welcome here...
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Old 04-14-2010, 02:17 PM   #132
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One year I failed to send in my w-2 forms. Made no difference at all, they didn't care. I guess they just looked them up or believed what I wrote. I got my refund like clockwork anyhow.
When you file electronically, it is not possible to send in the w-2 forms. Instead, you enter the information from your w-2 form, and the tax software creates an electronic version of the w-2 form with the information that you provided.
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Old 04-14-2010, 02:25 PM   #133
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Well, so far I have learned that you can eFile for an extension!

That's handy!

Audrey
Well we did it. We used the Free File Fillable Forms site.

It was a wee bit more involved than expected as I had to download some Microsoft plug-in in order to do it from Safari on my Mac and there was quite a bit to fill out. Also, you had to know your AGI from last year AND the PINs that were used to e-File last year. But it worked (except for printing) and we got an email acknowledgement of acceptance within 24 hours.

I did the Method#2 here How to E-File Your Federal Tax Extension Online For Free [2009/2010] » My Money Blog

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Old 04-14-2010, 03:30 PM   #134
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Originally Posted by thinker25 View Post
I have been trying to predict my taxes for 2010 and the H&R Block at Home program wants to know what's in box xxx on form xxx that I don't have! Driving me nuts. I'm retiring in July so I kind of need to have an idea of what counts where and then there are those lovely estimated taxes.... based on what...

I should start a new thread - how do you estimate taxes when you worked part of the year and converted an IRA to a ROTH...

Answers welcome here...
I did the same think. Luckily I had all the forms I needed from this year so all I did is alter the amounts. If you will be engaged in new activities with new forms next year, that can be quite a research process.
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Old 04-15-2010, 07:56 PM   #135
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I learned how to do a schedule C and a 1040X

I think the 16th amendment should be scrapped...

Flat tax with no deductions or exceptions for anyone or any company...

No more IRA's or 401K's ect...

No penaltys except for late payments...

No estimated quarterly taxes...

No taxes on capital gains, dividends, interest, estates ect...

One page tax code...
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Old 04-15-2010, 09:47 PM   #136
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I learned how to do a schedule C and a 1040X
Me too. Also that turbo tax doesn't handle it very well when changing state as well.
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Old 04-15-2010, 10:34 PM   #137
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Quote:
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I learned how to do a schedule C and a 1040X

I think the 16th amendment should be scrapped...

Flat tax with no deductions or exceptions for anyone or any company...

No more IRA's or 401K's ect...

No penaltys except for late payments...

No estimated quarterly taxes...

No taxes on capital gains, dividends, interest, estates ect...

One page tax code...

Sounds real fair. A person with 10,000 in income from work and no other resources pays a tax. A person with a million dollar capital gain and 250,000 in dividends and interest pays nothing.

Schedule C is profit and loss from a business. A business will have income and expenses. Would you pay tax on the entire income, ignoring the expense? Not very fair or practical. What if you had a big contract and it paid your business a million dollars but your profit was $10,000. Maybe that is acceptable profit margin in your business. Tax the whole million? Compare that situation to the company down the street in a different line of work which sells its product for a million dollars and makes a half a million. Tax it the same?


Hope you are just venting.
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Old 04-15-2010, 11:34 PM   #138
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I learned how to file the new (well new to me, anyways) 1040X form. Not as bad as the last time I had to use it. As a result I learned viscerally the difference between my combined effective tax rate (~6%) and my combined marginal rate (32.8%). Add in SS/Medicare and that last dollar is looking at ~40%. Ouch.

I also realized that if I keep my current job, I will approximately spend in income+SS+MC taxes this year what I would spend on my entire retirement budget when FI. This is both cool and sad.

2Cor521
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