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My effective tax rate went down by about 10% compared to last year. All of the people on my team, who make less and are not partners (i.e. not benefiting from LLC pass thru income), will have a higher tax rate. So messed up. FWIW, our founder gave them extra bonuses to make up the difference, but I suspect most are not so fortunate.
+1 on that.Quote:
Originally Posted by jackstraw
My wife and I owe $6200. Fucking hell. We got married and both got significant raises in 2018 but I didn't see that coming, I usually get a few hundred back and she's owed up to $1k in the past. We're both claiming no exemptions already, guess we're changing that to withdraw as if single. She makes too much for her student loans interests to be deductible. We have two mortgages. HSA and 401k contributions maxed on her end. I don't have a retirement plan at work and overcontributed to my Roth, in the process of re-classifying most of the contributions as traditional.
Not psyched about taxes this year...
I used to do mine with pencil and paper, figured if I can do calculus I could do taxes. But switched to turbo tax when things got more complicated...rental income, long and short capital gains, couple different 1099's, business deductions. I still get cranky with the software, but overall ok. Use the its deductible webpage like someone mentioned for donations, that is nice, but clunky.
I typically get a big refund because my company taxes my end of year bonus as if it was a normal paycheck and its amount is 1/26 of my salary, so 37% Fed + 10% State. I tried to explain to the accounting person they can do it like normal, but I don't think their software allows or there is a lack of understanding. Didn't want to make to big a fuss, because they could just not give me a bonus :-).
Effective tax rate is the number people should look at, not refund or owe amount. Our rate went down this year, but wife did not work for 4 months and I did not work for 3 months due to new baby. So we didn't get hit with AMT & got less limited deductions for kids.
FWIW for procrastinators, for active junky has 10% cash back on TurboTax and other tax software.
https://www.activejunky.com/retailer/turbotax
I don't really know how I did tax wise compared to last year since we made less this year than last, but our CPA charged us a couple hundred less, so thank the tax cut bill for that. No itemized deductions, no AMT calculation.
Saving a few hundred per year is great, but my descendants will be paying for the bill unto the 10th generation (assuming there is a 10th generation; I'm not optimistic.)
Need a little help understanding something. We have been owing a lot the last couple years. Wife’s HR talked her into filling out the new and improved W4 last winter and she did it correctly, not faulting her one bit, so we really, really owe. We are a 4 person house that basically claimed 3 on our combined W4’s a so yeah we owe thousands more.
Ok here’s what I am here to ask about. Last year I grabbed a small side gig. Knowing we have been owing a lot of taxes, I filled out the W4 for this to basically take all of it for taxes. Here’s the numbers:
Gross $2,833.80 (soc and med wages had same gross)
Fed Tax Withheld: $2,099.07
Soc Sec 175.70
Medi $41.09
State $300
State transit tax $2.82
Net Take Home $215.12
Why did this job only lower my tax obligation by $1600sh (I wish I would have written the number down) and not closer to $2000 when only $215.12 should be taxable income?
We are in the 22% bracket (with or without this side income) so I would think that what we owe to the Feds should have been $2,051 less. What am I not understanding?
Because you earned more money so you owe more taxes, all things being equal.
$2,833 x .22 = $623
$2,099 - $623 = $1,466
How much you withheld has nothing to do with either your taxable income. That's just an interest free loan that you gave to the Federal Government.
I used to not do that on principle. Now I not do that because its really money at 5%.
Those numbers are rough. Mostly like you actually own a bit more due to your side gig because your marginal tax rate is higher than your effective tax rate.
Thank you; that’s the math.
I now see the fundamental flaw in my understanding. I didn’t think that money paid to other taxes counted as taxable income. Feds are taking 22% of the gross even if they will take their flat rates and the state is going to hit it too and the county too will get its cut. I now also see why folks often don’t want overtime unless it’s at a significantly higher wage.
I do know that what was withheld had nothing to do with what is owed, and I have been in your camp until last year when the IRS tried to give us a fine for not withholding enough and we are projected to maybe have it this year too. Also, what we have been saving at 4.5% is only half of the shortfall.
Now any chance you know why the W4 calculation are so off now even when taking the standard deduction?
We used to itemize deductions. Honestly, I have been lost since the new tax law.
You are on the right track, mostly.
Overtime: That's because people are dumb and can't budget. They just think in terms of "owing taxes" or "getting money back"
Gross Income and Taxable Income are not the same: maybe look at the 1040EZ form to see. This is where your deductions come in and why marginal and effective tax rates are different.
And you are double taxed on your income everyday. Sales, tax, vehicles, property, state income, city....Best not the think about it too much.
I used pencil and paper for many years when i was working and claiming car expense
now I use Wealthsimple which is an on-line tool, rev Canada auto fills everything and I'm done in < 1 hr, I pay online and its SO easy
I always owe a lot of money but thats cuz I don't pay enough tax during the year, so I think rev can might be asking me to pre-pay quartlerly instalment this year
I remember when CC interest and business meals were 100%. deductible. And 1099 income was reported the the IRS on little pieces of tissue paper.
I don't quite understand the new W4 form, but I do know that payroll tax deductions have always been more squirrelly when there are 2 source of income. So, if you "tell" the system that you have 3 people in your household and at that job you make $100k/yr, the payroll system is going to deduct what is appropriate for 3 people and $100k/yr. If your wife makes $125k/yr and fills her W4 out the same way, her payroll system is going to deduct what is appropriate for 3 people and $125k/yr.Quote:
Originally Posted by Hood26
But that is not the same as the tax you owe on $225k for the year, that tax burden is much higher, and neither payroll system is going to deduct the correct amount of taxes, leaving you with a tax bill at year end.
I don't think you're fully grasping it yet if you think overtime or bonuses are taxed any differently than regular paychecks. They're not. They might be *withheld* differently, but again, withholding has zero to do with taxes paid.Quote:
Originally Posted by Hood26
The W4 form is annoying for sure. I wish there was an option for "fuck your form, I know my effective tax rate (different from marginal tax rate), please just withhold a flat xx% from all of my paychecks". Instead they try to calculate it for you, but using incomplete information.
You may find it useful to do a mid-year checkup, as I often do. Basically, roughly calculate your taxes and see if you're on track to withholding the correct amount. I can walk through more details and provide an example if it would help, but just do it in excel. Calculate your total expected income for the year (can use your year-to-date income, income per paycheck, and number of paychecks remaining). Do the same for deductions. Do the math to calculate total expected taxable income for the year. Calculate tax owed via brackets. Then do the same for withholding (use your year-to-date withholding, withholding per paycheck, and number of paychecks remaining). Compare withholding vs tax owed, and adjust withholding (via W4) as needed.
I get that this income wasn’t taxed at a high rate than the rest. I am just saying it didn’t pass the Cost Benefit analysis for this particular side work. It was a lot of work for not much pay and I wish I had the time back.
At least it didn’t push me into a higher tax bracket.
Yep...you definitely don't get it. You don't end up with less money from earning more W2 wages.
Taxes paid is calculated on your return, not via your withholdings.
You made what you made and paid the tax you paid.
Sent from my Turbo 850 Flatbrimed Highhorse
Even if it did, you'd pay a whopping 2% more, only on the additional income over the top of the 22% bucket. Not a reason to avoid the work at all. If it was shitty work not worth the time, that's fine, but that's not a financial reason.Quote:
Originally Posted by Hood26
When I started my business I used Taxact online and was pleasantly surprised at how easy it was and how much I got back. Until after 3 years the IRS came calling and turns out Taxact was very wrong. A friend referred me to his tax person. She fixed the previous 3 years, I paid the $$$ and have not looked back. Costs me a fair hit $ 450.00, worth every penny and we have become friends as well.
I’m now working a wage job. Was pretty amazed at the workers reluctance to take on overtime and double time. Comments like it’s not worth the money. The taxes eat away the overtime pay. So, I don’t want to work.
Clearly mistaking the high deductions on the heavy checks for more taxes paid. These guys turn down weekends at $140 an hr. I’m eating them up. We have 12 hour days paying bank.
Yeah, a kid that used to work for me told me that it was better for him to work two jobs than one with overtime because he got taxed so much. I said nothing. Because i was his second job. But for fucks sakes man, these people really have no clue how the system works but are so confident in their assertions. Pretty comical if it wasn't so sad.Quote:
Originally Posted by CascadeLuke
Yah I tried to share the counterpoint of view to a few of them but eyes glazed over and it benefits me since there are limited workers who are extended the overtime work.
It should be a high school requirement to be able to complete a basic tax return by hand. No software.
"Household Finance" should be a required class. I'm stunned at how many grown ass adults don't have a clue about credit cards or checking accounts or compound interest; they know how to "use" a credit card or a checking account and understand basic interest, but no clue how to use these all effectively and not get fucked by them.Quote:
Originally Posted by bfree
This. The pay wasn’t worth the time. I will be turning down that side gig in the future. I know that income netted some in my pocket, but it was a lot of time. At least it is in an area of interest and strength, just would hate to crunch what the hourly would have been.Quote:
Originally Posted by bfree
I got down with the IRS Tax Withholding Calc for next year. Looks like we will owe $24,753 to Fed. Next step I need to figure out how to make each W4 withhold $1035 since wife and I make pretty much the same amount.
Thanks folks. I get the big picture of this shit, but am just not great at zooming into the personal without considerable effort.
We are going to explore meeting with an advisor though to make a better plan overall to figure out the right balance of donations, and Roth, and EE deferred, 403b, college savings, and pensions and all that.
I think I am leaving money on the table, just need help finding it. Anyone want to start a church of skiing; the Catholic Church isn’t doing much for me anymore.
Can I get a flat brimmed tax hat too?
Use the Extra Withholding (line 4c) on w4. Enter the difference between what they are currently withholding and what you want them to withhold (per paycheck). I have this set at $150 or something like that.Quote:
Originally Posted by Hood26
And check your withholding number, that doesn't look right unless you and your wife both get paid once a month.
Or just go pay the extra estimated tax at the IRS website.
I’ve anecdotally heard that the new W4, under the Trump tax bill, was designed to make people with hold less so they would have to pay a larger sum at tax time. This was supposedly Paul Ryan’s idea to make people more anti-tax / anti government. I don’t know if this is true or not and welcome any actual facts disproving or affirming.
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