Anyone nervous to do their taxes?

[TwoMisfits]

Yes, I just realized that this year!

The self-employment tax (vs the income tax) would never be offset by a child tax credit, just like employee/employer Social Security and Medicare taxes are not offset. Social Security and Medicare taxes are pretty much always X% off the top of income, and self-employed individuals do have to pay the business and individual portions (since they act as both parts, by self-employing themselves).

 

[twoolle]

The self-employment tax (vs the income tax) would never be offset by a child tax credit, just like employee/employer Social Security and Medicare taxes are not offset. Social Security and Medicare taxes are pretty much always X% off the top of income, and self-employed individuals do have to pay the business and individual portions (since they act as both parts, by self-employing themselves).

Yes, that is what I realized when I thought about it too! This is only the 2nd year I have had to pay SE tax so never had to think about it too much before.

 

[TwoMisfits]

So, I honestly thought we would be better off this year, but what I didn't realize is how much more money we actually made this year. Our situation is a bit complicated, DH owns his own business and since it's an S-Corp he gets paid hourly wages but those are basically what any other laborer would get paid. We pay FICA on wages only and the rest of the profit from the business is treated as other income on our federal 1040. This is great until it comes to calculating the additional child tax credit (the refundable portion). Since they know you didn't pay FICA on the majority of the income then they limit the refundable credit to a certain percentage of your wage income. Last few years we actually qualified for the earned income credit and since we made about 20k more this year, we did not qualify at all. So long story short, our taxable income went up 20k and our net taxes for both federal and state came to a $300 credit. I should mention we have 4 kids that all qualify for the child tax credit. Last year we made 20k less and our net tax was a $1700 credit.

We live in MO which is a very affordable place to live (our 1500sq ft house on 3 acres cost us $112k back in 2013). Our AGI this year was 68k compared to 48k last year (We had some business equipment we bought last year that qualified for Section 179 which is why our income was a bit lower, plus we had higher overall revenue this year). We have no other debt besides our house, so our bills are low, which is why we can afford to live off such a meager income!

So, you actually paid zero income taxes to a state or the fed at $68K of income? You only paid the normal FICA that everyone pays? That can't be right...but if it is, you have one of the sweetest deals running...

PS - $20K in income at the 12% rate would be $2400 more in taxes...so somehow, you came out even more ahead, if you only lost $1400 of credit...

 

[twoolle]

So, you actually paid zero income taxes to a state or the fed at $68K of income? You only paid the normal FICA that everyone pays? That can't be right...but if it is, you have one of the sweetest deals running...

PS - $20K in income at the 12% rate would be $2400 more in taxes...so somehow, you came out even more ahead, if you only lost $1400 of credit...

I know it's crazy...our state taxes are actually higher than our fed taxes. Fed taxable income this year was 35k (68k income, less 24k std ded, less 9k biz ded). Total tax came to 3780 plus 303 SE tax. Remember I have 4 kids so at 2k credit per kid that completely washes the 3780. Then I had to do the calc to see what part was refundable as the additional child tax credit. That came to 2.3k so offset that with the .3k SE tax then it's a federal credit of 2k. But my Missouri taxes came to 1.7k

Now, we do pay our quarterly FICA thru the business and none of that is part of my above calculations. Hope that makes sense.

 

[tvguy]

Just back from the CPA. He said we are the people the tax cuts were targeted at, less than $125,000 household gross income and who can't itemize.
The summary:
2018 income up from 2017.
Total federal tax on larger income $2,000 lower.
Federal tax refund up $1,000
Revised withholding tables increase take home pay $1,000 over the year.
Tax rate dropped from 14% to 12%.

 

[barkley]

Just back from the CPA. He said we are the people the tax cuts were targeted at, less than $125,000 household gross income and who can't itemize.
The summary:
2018 income up from 2017.
Total federal tax on larger income $2,000 lower.
Federal tax refund up $1,000
Revised withholding tables increase take home pay $1,000 over the year.
Tax rate dropped from 14% to 12%.

if you don't mind sharing-how is the glorious state of california treating you tax wise (seemed like if we did well with the feds it did'nt nesc. balance out with the state when we lived down there).

 

[tvguy]

if you don't mind sharing-how is the glorious state of california treating you tax wise (seemed like if we did well with the feds it did'nt nesc. balance out with the state when we lived down there).

State tax code didn't change. Last year we got $375 back, this year $300. The higher income cost us $75. No idea exactly what the 12 hike in the gas tax did to my budget, I'm guessing we used 1,000 gallons of gas last year, so that would be $120 extra tax.

 

[bluehen]

I am one of those lucky people that had deductions of about 24k. Losing the standard deduction has cost us a lot. Being retired with low income we had no rate deduction. We have no problems affording the increase, but do wonder about people trying to live off our income as opposed to us living of assets.

 

[tvguy]

I am one of those lucky people that had deductions of about 24k. Losing the standard deduction has cost us a lot. Being retired with low income we had no rate deduction. We have no problems affording the increase, but do wonder about people trying to live off our income as opposed to us living of assets.

Wow, I can't imagine being low income and having enough money to qualify for $24,000 in deductions.

 

[bluehen]

Wow, I can't imagine being low income and having enough money to qualify for $24,000 in deductions.

At 63 health care can cost that much alone. I have subsidized from my old company but still pay 9000 a year in premium plus 4000 in deductibles with even more in copays. We are healthy but it all adds up. Add what we give to the church and real estate taxes we hit 22,900 on itemized deductions.

Like I said we live on assets. Our tax structure treats those very well. Capital gains and dividends are easily managed and taxed at a 0 rate up to around 74k. I would think if your income is where ours is your health care would come through ACA at a much lower rate than we pay. I could have switched over, but felt that was like cheating. I have no problem managing my assets to minimize taxes using the current tax laws. I could not in all conscience hit up the american taxpayer to subsidize my health care for big bucks.

 

[tvguy]

At 63 health care can cost that much alone. I have subsidized from my old company but still pay 9000 a year in premium plus 4000 in deductibles with even more in copays. We are healthy but it all adds up. Add what we give to the church and real estate taxes we hit 22,900 on itemized deductions.

Like I said we live on assets. Our tax structure treats those very well. Capital gains and dividends are easily managed and taxed at a 0 rate up to around 74k. I would think if your income is where ours is your health care would come through ACA at a much lower rate than we pay. I could have switched over, but felt that was like cheating. I have no problem managing my assets to minimize taxes using the current tax laws. I could not in all conscience hit up the american taxpayer to subsidize my health care for big bucks.

I'm almost 62 and hope to retire next year. Affordable Healthcare Act is an unfortunate name for the healthcare act. My medical insurance estimates from 10 years ago, before ACA were $6,000 a year private and $10,000 COBRA. Now they are $23,000 private and $13,000 COBRA. So the roles have switched. And being in California, COBRA is 36 months not 18, so that will take me to Medicare.

 

[runwad]

I could not in all conscience hit up the american taxpayer to subsidize my health care for big bucks.

You are a rariety, thank you!!

 

[Disneytrish]

Big shock for us this year and not in a good way!

 

[jerseygal]

I'm almost 62 and hope to retire next year. Affordable Healthcare Act is an unfortunate name for the healthcare act. My medical insurance estimates from 10 years ago, before ACA were $6,000 a year private and $10,000 COBRA. Now they are $23,000 private and $13,000 COBRA. So the roles have switched. And being in California, COBRA is 36 months not 18, so that will take me to Medicare.

Cobra is expensive. If you check the Federal Exchange or State Exchange under ACA, if you keep your income “low enough” between 62 and 65, you should be able to qualify for health insurance and get a premium tax credit. To the best of my knowledge, these plans don’t base the rates on assets, only income, and generally would be lower than Cobra to bridge the gap between 62 and 65 when you are eligible for Medicare.

 

[wdw_dine_junkie]

I just typed in all my crap on turbotax. You'd think being a nurse and law enforcement, it wouldn't be that difficult. It is. TT says for us to take the standard deduction, my federal taxes are up $1400. However, my state (that gave me $11 last year) is giving me $1600 this year AND I owe a penalty for under estimating my taxes? I've never had that one before. Usually we end up paying about $3000. This year it's $4400 and I get to pay a penalty. BTW, DH claims 0 and I tried claiming 1 and taking out 16% pretax for retirement... now I guess I'll be 0 and 16%.

Is this all W2 income or other sources? What is your filing status on your W-4s? If you are both choosing status Married and claiming 0 or 1 , you are likely under withholding which might explain your penalty and having to owe yearly. When you choose 'Married' , the form is assuming the filer is the only income for the family, because it doesn't know about the other income and what tax bracket the family will be in after you add two incomes together. We usually end up with a refund, but with a dual income no children household, we each choose 'Married but withholding at the higher single rate.'

 

[bluehen]

Cobra is expensive. If you check the Federal Exchange or State Exchange under ACA, if you keep your income “low enough” between 62 and 65, you should be able to qualify for health insurance and get a premium tax credit. To the best of my knowledge, these plans don’t base the rates on assets, only income, and generally would be lower than Cobra to bridge the gap between 62 and 65 when you are eligible for Medicare.

Yes it is income only. I think there may be some limitations too if you are provided employer health care depending on cost. My memory is that you are responsible for premiums to 10% of your income and the government picks up the rest. There is a maximum income at which you get no subsidy. I also think if you have very low income the government helps with copays and deductibles too. I am not sure where those income levels lie.

 

[jerseygal]

Yes it is income only. I think there may be some limitations too if you are provided employer health care depending on cost. My memory is that you are responsible for premiums to 10% of your income and the government picks up the rest. There is a maximum income at which you get no subsidy. I also think if you have very low income the government helps with copays and deductibles too. I am not sure where those income levels lie.

Thanks! Yes, IF you are provided health insurance from employer and it is considered unaffordable by guideline you are eligible for ACA plan, but that is if you are gainfully employed. I don’t believe that Cobra would meet that test, don’t think that it is considered being offered an employer plan, since COBRA is 100 percent funded by the retiree, there is no contribution to a Cobra plan unlike a typical health plan through an employer. It is my understanding that taxpayers between say 62 and 65 before they are entihledctobMedicare IF their income is low enough, they would fall into Medicaid coverage instead of ACA coverage with a premium tax credit. If you have low enough income and are less than 65, and investment income of less than something like $3,400 you would qualify for earned income tax credit also.

 

[Birdie dog]

Is this all W2 income or other sources? What is your filing status on your W-4s? If you are both choosing status Married and claiming 0 or 1 , you are likely under withholding which might explain your penalty and having to owe yearly. When you choose 'Married' , the form is assuming the filer is the only income for the family, because it doesn't know about the other income and what tax bracket the family will be in after you add two incomes together. We usually end up with a refund, but with a dual income no children household, we each choose 'Married but withholding at the higher single rate.'

It's W-2 income. DH files 0 and I filed 1 and 16% pre-tax to retirement. I've since switched to filing 0 also. And add to the joy that our take home was $800 less last year (due to me upping my retirement contribution) and I STILL owe 1400 more.

 

[wdw_dine_junkie]

It's W-2 income. DH files 0 and I filed 1 and 16% pre-tax to retirement. I've since switched to filing 0 also. And add to the joy that our take home was $800 less last year (due to me upping my retirement contribution) and I STILL owe 1400 more.

The question isn't about the allowances you claim (Box 5), but the status you chose on your W4s (Box 3). The choices are:

Single
Married
Married, but withhold at higher Single rate. (This is what I have to choose with a dual income household, especially if the salaries are close to same amounts.)

I have a co-worker who consistently owed and it was because of being dual income and both choosing Married on their W4s with their employers, even with 0 allowances. They were not withholding enough individually that way. And the withholding tables were adjusted this past year, which could account for even less withholding.

Did you check your effective tax rate and what your actual tax liability was (regardless of what you owe the IRS? Did I go down at all?)

Sorry I can't link yet, but you can google the W4 form and look at the pdf on the IRS site, your employer probably has an electronic page with the same questions.

 

[Birdie dog]

The question isn't about the allowances you claim (Box 5), but the status you chose on your W4s (Box 3). The choices are:

Single
Married
Married, but withhold at higher Single rate. (This is what I have to choose with a dual income household, especially if the salaries are close to same amounts.)

I have a co-worker who consistently owed and it was because of being dual income and both choosing Married on their W4s with their employers, even with 0 allowances. They were not withholding enough individually that way. And the withholding tables were adjusted this past year, which could account for even less withholding.

Did you check your effective tax rate and what your actual tax liability was (regardless of what you owe the IRS? Did I go down at all?)

Sorry I can't link yet, but you can google the W4 form and look at the pdf on the IRS site, your employer probably has an electronic page with the same questions.

I'm pretty sure we file married. I need to check.