Tax time

[Beachbourbon]

I’m getting killed by the new tax law despite my best efforts. It appears the elimination of the personal exemptions have done the most damage. Anyone else sending their camping $ to the IRS?

[jtaylor1920]

Yep, a big swing for us this year. We used to get money back and paid big time this year. We’re trying to plan better and put more into our deferred compensation plans.

[owgpz]

For the first time in decades I had to pay $ to the state and federal governments instead of receiving a five-figure refund. Personally I am very disappointed in the "tax cut".

[XenoRev]

I've heard this a lot. I'm self employed and file quarterlies. My state tax (MI, one of the highest in the nation) was spot on, and I recieved a notable refund (camping dollars[emoji106])
If you paid in, did you have less withholding this year? Meaning more $ in your pocket each paycheck but not enough at the IRS come tax time?

[Gumpster808]

Along with the changes they also started withholding 2% less from paychecks. We would have been even this year but the change in brackets moved us and have to pay a bunch.

Good timing too since I was just downsized and still looking for work. Guess I’ll have more time to get things ready for the season if I don’t find something soon.

Waiting to file until Monday. No sense sending them my money early [emoji3]

[NJKris]

I'm paying this year. Luckily the state refund offsets the Fed debt. Deducting 9k property tax bill and state income tax used to be a huge benefit. Turbotax allowed me to hold off on paying until 4/15, at which time it automatically will be deducted from my checking account.

[JayArras]

In my view, paying the IRS at tax time is a good thing. It means you haven't been giving the feds an interest-free loan all year.

[CHICKDOE]

yes, we got hit and it is a result of two things. in the past we itemized and our itemized deductions were close to the new increased standard deduction. so yes, we used the new increased standard deduction this year but we lost the $8K in personal exemptions. net result is more taxable income. the second issue was more subtle until i figured it out. we both get social security and a portion of it has always been taxable, some at the 85% level. our income is fixed each month. last year i took an extra $5K distribution from one of our investments. i withheld from that distribution thinking our taxable income would be $5K greater this year. was i wrong! our taxable income was $9.25K greater as this distribution caused another $4.25K of our fixed social security income to be taxed at the 85% rate.

[KyDan]

Originally Posted by JayArras

In my view, paying the IRS at tax time is a good thing. It means you haven't been giving the feds an interest-free loan all year.

This ^^^
We paid slightly less tax than last year and got about the same small refund from the fed.

If you got a 5 figure refund last year and owe this year you need to look at your TOTAL tax for last year and this year. You more than likely paid less this year. You just spent your refund during the year since each pay check had less withheld.
Try to adjust your withholding so you get very little refund and up your weekly payroll savings act.

[NMWildcat]

Since retirement, we have always tried to come out even at tax time. This year was a challenge. Most of our friends and relatives are having to pay and are blaming the new tax rules as screwing them, when in reality it is their fault, as they didn't adjust their withholding properly. I guess they thought the increase in their checks was a free bonus and didn't investigate why they were bigger. I personally like the new rules, lots less work!

[Flybob]

As mentioned, you need to look at your total tax percentage this year vs last year. In most cases it will be very close. The surprise for many is that because less was withheld during the year less is returned at the end of the year. This is very similar to purchasing an RV or vehicle. The only number that really matters in the end is final cost to you.

[CHICKDOE]

i have been a volunteer tax preparer for several years and i'll make a few comments about what i saw this year with the new tax laws.

1. the feds made a large increase in the standard deduction and if all you were filing was a federal return it would be easier as you wouldn't have to bother with itemized deductions. in fact, of the over 100 returns i prepared this year only 1 claimed itemized deductions on the federal return.

2. but we live in a state that has a state income tax. the state legislature did nothing to conform the state tax laws with the new federal tax laws. the state standard deduction for a joint return is only $10K. it does take much for a married couple to have over $10K of itemized deductions (medicare premium, supplement premium, property taxes, mortgage interest, vehicle fees, glasses, hearing aids, contributions). so you still have to go through all the effort of entering all detailed itemized deductions. it was very common to file a federal return using the federal standard deduction and a state return using itemized deductions.

3. a large percentage of the returns were for retired people that did not have a w-2. they did not see any impact of reduced withholding from their paycheck during the year. probably not a one of them actually adjusted their withholding from social security, pensions, or investments. after preparing their returns we highlighted how they could adjust their withholding on these items. but then personal preference takes over. some people would like more each month, some like the large refund. to each his own.

[Jim34RL]

My wife and I have been retired for over 8 years now and usually break even on our returns give or take +/-$100. Will I screwed up royally for the 2018 income taxes. I had my return done (every year same tax accountant) and found out we are getting over $900 back. No state income tax since we are retired.

The new tax laws are a really benefit to us just need to know how much to withhold on income during the year. I usually with hold between 15 and 20% so, we break even each year I will need to adjust this a little.

[clarkbre]

We went with the strategy of having baby #3. It was close but he arrived 12/25/18. That helped us a bit!

My wife has her own business and we pay quarterlies through that. Between the standard withholdings from my pay check and 30% of her income that we set aside in a "Tax Saving" account, we had money left over in savings. It was essentially getting a small refund without the government handling it for us.

[Iwritecode]

Originally Posted by JayArras

In my view, paying the IRS at tax time is a good thing. It means you haven't been giving the feds an interest-free loan all year.

I look at it as a way of forcing myself to save money. Interest rates are so low that I'm not really worried about the extra few bucks I might be missing out on by keeping it in a savings account of some sort.

Plus the temptation to spend it is 100% non-existent.

We got back just about enough to pay our seasonal fees for the year.

[Iwritecode]

Also FWIW, I heard this is the new tax form they'll start using for next year.

[CHICKDOE]

congratulations on the xmas baby! you found out about the increased child tax credit!

i did one return for a couple in their mid 20's. the husband had a w-2 job. that was their only income. in 2017 they got a refund of a few hundred dollars. this year the w-2 was nearly identical to the one from 2017 but they got a refund of several thousand dollars. what changed? a baby in 2018. say hello to child tax credit and earned income credit. by the way, they had no idea how the baby would affect their taxes and they were amazed!

[clarkbre]

Originally Posted by CHICKDOE

congratulations on the xmas baby! you found out about the increased child tax credit!

i did one return for a couple in their mid 20's. the husband had a w-2 job. that was their only income. in 2017 they got a refund of a few hundred dollars. this year the w-2 was nearly identical to the one from 2017 but they got a refund of several thousand dollars. what changed? a baby in 2018. say hello to child tax credit and earned income credit. by the way, they had no idea how the baby would affect their taxes and they were amazed!

Thank you! He's already had 8 nights in the trailer so he's fitting right in with us.

She was due 1/1/19 so it was a toss up whether we'd see a '18 tax benefit or a '19 benefit in our healthcare flex spending account. Either way, it worked for us and we're happy to have the little bugger around.

[Iwritecode]

Originally Posted by CHICKDOE

congratulations on the xmas baby! you found out about the increased child tax credit!

i did one return for a couple in their mid 20's. the husband had a w-2 job. that was their only income. in 2017 they got a refund of a few hundred dollars. this year the w-2 was nearly identical to the one from 2017 but they got a refund of several thousand dollars. what changed? a baby in 2018. say hello to child tax credit and earned income credit. by the way, they had no idea how the baby would affect their taxes and they were amazed!

My wife and I had a similar experience in the late 90's. First kid was born August of 1996 and 2nd was December of 1997. Plus the fact that I started working a "real" job in 1998 and we weren't married yet (so I was able to claim head of household) we were able to buy a house and our first decent car with those first few tax returns.

[babock]

If you live in a high tax state where you have high state income tax and high property tax, you may pay more although the lower tax rates help you out. Bottom line, looking at the refund only is pretty simple minded. You have to look at your total tax liability to really compare.