First Tax Return Since Retiring--OUCH!

[Big_Hitter]

Despite my username, I retired on 2/7/2020. Today I completed our first post-retirement tax return. Holy moly--writing that check to the gubmint is gonna HURT!

that's the exact opposite of my first year in retirement LOL

 

[Big_Hitter]

I had no idea that the insurance company didn't withhold income taxes for the 10 months, and I'm afraid to complete my income taxes. That'll teach me to not pay close attention to my personal business that's essentially on cruise control.

the insurance company should have maintained whatever elections you had with the qualified plan - sounds like a data feed fail somewhere

 

[dixter]

This is the way I have done my taxes for the last couple of years and plan on doing going forward...

In January I take funds out of my Fidelity retirement accounts... the funds are to pay for the previous years taxes and what funding I will need for the rest of the year... I don't pay quarterly tax payments as the small amount that the IRS charges to use my own money isn't that much and I can make it up other ways via investments... and write it off as a Tax prep cost

This way my actual taxes for the year get pushed out by one year and four months, the tax bill is paid via a Southwest Air credit card, so that gets me mileage so we take a free trip to Hawaii..

 

[pb4uski]

^^^ So do you include a Form 2210 as part of your tax return filing or do you just let the IRS send you a bill for underpayment penalties and interest?

What does it cost you to pay your tax bill with your Southwest Air credit card? Usually there is a ~2% fee for paying by credit card.

 

[dixter]

^^^ So do you include a Form 2210 as part of your tax return filing or do you just let the IRS send you a bill for underpayment penalties and interest?

What does it cost you to pay your tax bill with your Southwest Air credit card? Usually there is a ~2% fee for paying by credit card.

there is a check box when you use Turbo Tax that ask's if you want to have the IRS send you a bill or not... I never check it so the IRS doesn't send a bill....

The rest of it gets written off as a " prepare the Tax Cost " ... ya drive to the store to get the Turbo Tax, there's gas, time to get it, 100% write off for lunch meal (during covid times) and other items as they occur... use the tax laws... thats why they wrote them....

 

[pb4uski]

I still don't get it. You say "... I don't pay quarterly tax payments ..." so I presume that you pay your tax when you file your return and that is fine... but if you use TT and don't make estimated payments as I recall it automatically includes a Form 2210 for underpayment penalties and interest. So does the amount that you pay include that?
It would be shown on Form 1040, line 38.

Its hard for me to get too excited about tax preparation costs as I don't itemize so there is no benefit.

Your list of tax preparation costs is dubious, but that's between you and the IRS... just be aware that if they audit you and think you are playing fast and loose then they'll dig deeper and are likely to be very unforgiving.

Also, what's the fee to pay with a credit card?

 

[SecondCor521]

The rest of it gets written off as a " prepare the Tax Cost " ... ya drive to the store to get the Turbo Tax, there's gas, time to get it, 100% write off for lunch meal (during covid times) and other items as they occur... use the tax laws... thats why they wrote them....

Except it probably doesn't unless you're a business or an estate or doing something wrong, because they've changed the tax laws as of a few years ago.

Tax prep fees were subject to a 2% of AGI floor as an itemized deductions, so they were rarely actually beneficial. Also with the higher standard deduction hardly anyone can itemize, and even if you could, they got rid of the miscellaneous itemized deductions which included tax preparation costs. So really nobody can deduct tax prep fees on their personal returns at the moment.

I really doubt you can legitimately deduct the credit card fee to *pay* your taxes as a tax *preparation* cost anyway. Or the cost of lunch, or gas. If you pay H&R Block or a CPA to do your taxes, you could. Again, if the deduction existed and if it mattered and if you exceeded the 2% AGI floor.

Or maybe you're doing something wrong on your taxes. I dunno. Not my circus, not my monkey.

 

[dixter]

its amazing what you can do with your taxes when you use a business credit card and a tax ID number.... virtually everything you do is a write off....

need to examine a possible business in St Croix....

Thats why I like Turbo Tax... you can fill it out 5 different ways and it checks for you to see if its going to go thru fine with the IRS.... never once has it turned down a tax return...

 

[pb4uski]

its amazing what you can do with your taxes when you use a business credit card and a tax ID number.... virtually everything you do is a write off....

It doesn't really work that way, but like SecondCor says... not my circus, not my monkey.

... The IRS is well aware that business owners and those who are self-employed are in a unique position. Unlike a salaried employee who receives a W-2 or a retiree who is issued a Form 1099R in connection with a pension distribution, business owners have the ability to determine their income tax liability. The absence of third party reporting to the IRS makes this possible. Although the U.S. Tax System is a voluntary system, the IRS is aware that business owners routinely pay personal expenses from their business accounts and thereafter deduct those expenses as if they were associated with the operation of a trade or a business.

While a criminal tax prosecution of a business owner can include the failure to file returns or the under-reporting of income and the overstatement of business deductions, many business owners assume that tax evasion is only associated with income side of the ledger. Nothing could be further from the truth. I.R.C. Section 7201 defines income tax evasion, in pertinent part, as the willful attempt “in any manner to evade or defeat any tax imposed by this title or the payment thereof. . . .” Id.

In addition to tax evasion, business owners, who are caught cheating on their business and/or personal tax returns are oftentimes charged with other crimes such as Conspiracy to Defraud the United States, money laundering, filing a fraudulent tax return, or theft of government funds.

 

[lem1955]

Despite my username, I retired on 2/7/2020. Today I completed our first post-retirement tax return. Holy moly--writing that check to the gubmint is gonna HURT!

I had time to do some daytrading this year, which was more successful than I realized, AND I did a backdoor Roth conversion in Dec 2020. AND I took a part time job 7 weeks after retiring. And here I was, hoping we might get a refund for the first time in ages this year without my old salary. HA.

This is kind of a pointless post. Just wanted to share my pain.

I've been semi-retired (very part time job) since 2015, and I haven't yet found a good way of estimating taxes for the upcoming year. With K1 type partnerships, different levels of ROTH conversions, consulting fee swings, and tax law changes - sometimes I have a big tax bill to pay and other times too large a refund, (meaning I didn't have use of the money during the year.)