Vent: Taxes

AnnaFV · February 2016

Hello everyone! This really is just a vent where I hope some of you can relate. I really hate this time of year. You know why? Because it seems everyone around me is getting a tax return but I have to pay in

It just feels so unfair. It feels like my husband and I are being punished for deciding to get married and not have kids. We do get a very small return from the state but federal we have to pay in. It really sucks too because I get a bonus at work around Christmas and I always have to save most of that for paying taxes. Oh well I gotta look at the bigger picture... My paychecks are decent and at least I get a bonus where I can save for them instead of going into more debt. I just wish others didn't brag about their returns(this is all I have been hearing at work). Can anyone else relate? I am not looking for advice but just to know that others are in the same boat.

als1982 · February 2016

If you want a tax refund, then change your withholdings. You'll get smaller pay checks though, and is that really what you want? As for the child tax credit, just look at the savings you have from not having kids, and benefits beyond just the financial. Time, sleep, a clean house, freedom, etc. Those IMO are worth far more than $1,000 per child. Sorry to not be able to commiserate, but my suggestion would be to shift your perspective. Oh, and life isn't EVER "fair."

jtmh2012 · February 2016

I haven't even been able to do my taxes yet. Still waiting on forms. Yet, like you it seems like everybody else has theirs done and back.

hoffse · February 2016

The first time one of your co-workers' refunds get stolen, you'll be happy you pay in.

Really, a big tax refund is nothing to brag about. I hate it when people do that too. All it means is that person overwithheld throughout the year. Some people do that intentionally, but I suspect most are just really bad at figuring out what it's supposed to be.

If you are paying in thousands each year, you might want to adjust your withholdings so that you see a little less each paycheck to lessen the blow. Unfortunately, you are correct that the government penalizes dual income households when both spouses make a certain amount. It's incredibly backwards (especially because it penalizes far more women than men), but there you have it. On the huge list of tax reforms, fixing the marriage penalty is probably going to be at the very bottom.

I realized recently that in the near future being married to my H will cost us tens of thousands of dollars in extra taxes per year, because both of us are salaried professionals. We would save that money if we got divorced. I told my H that my willingness to pay that extra money to be married to him is a sign of my true love and dedication, lol.

hoffse · February 2016

als1982 said:

If you want a tax refund, then change your withholdings. You'll get smaller pay checks though, and is that really what you want? As for the child tax credit, just look at the savings you have from not having kids, and benefits beyond just the financial. Time, sleep, a clean house, freedom, etc. Those IMO are worth far more than $1,000 per child. Sorry to not be able to commiserate, but my suggestion would be to shift your perspective. Oh, and life isn't EVER "fair."

I have to agree with this too. The marriage penalty bothers me a lot, but the tax break for having kids really doesn't. It costs WAY more than that to bear and raise children, so I'll happily give that one up. I figure our first full year of having kids is going to run us in the neighborhood of $18-$20K between the massive increases to our health insurance and the costs of child care.

vlagrl29 · February 2016

eh, we are both self employed so we pay our fair share of taxes. Its just something you have to save and prioritize for. We just started getting back a small refund every year the last few years I think because we have the child deduction now.

short+sassy · February 2016

I commiserate with you! I ALWAYS have to pay a lot of taxes. Some of that is not having kids (ie fat deductions, but huge expenses), but a lot of it is side income I make. But I know it will happen each year and I plan for it. I look at it that this was extra money I used to pay down my Home Equity Line of Credit throughout the year...thereby saving good chunks of interest...from Uncle Sam's money. Then I pay him his due in April when I file my return.

On other tax topics, the marriage penalty that @hoffse refers to is infuriating.

However, and I've said this in a number of posts, I also don't agree with most deductions. I don't think there should be a any kind of deductions for people having children or for their mortgage interest. My exception would be for someone taking care of a disabled person, whether adult or child. Because buying a home or having children are personal life decisions and I seriously don't understand why this is even a thing. Yet they are. And big ones. And popular ones. I definitely don't blame anyone for taking those deductions that are available...I'm a homeowner myself and certainly take my interest deduction...but it is not how I would do things if I were Queen of the World.

Erikan73 · February 2016

I'm with you, we end up breaking about even each year because we're DINKS (double income no kids). Which I'm okay with, it's better then owing. It's rough though when you have friends and family around you talking about the big refunds they are getting and can't understand why we aren't getting it. Well it's because we don't have any kids and make decent money. Like I said, I'm just happy not to owe.

jtmh2012 · February 2016

hoffse said:

I realized recently that in the near future being married to my H will cost us tens of thousands of dollars in extra taxes per year, because both of us are salaried professionals. We would save that money if we got divorced. I told my H that my willingness to pay that extra money to be married to him is a sign of my true love and dedication, lol.

My wife has the potential to far out earn me (she's got a masters, I don't) and we'd run into the same thing. Not divorcing just to save the money. I've also been looking at IRA contribution limits. Another area where you get penalized.

ThinkingCapital · February 2016

It's understandable to feel down and to want to vent about taxes. However, it's also a good idea to think about what you can do in order to reduce your taxes, if you'd like. This is a good time of year to review your finances and your current money situation, so take advantage of it!

formerlyGDaisy09 · February 2016

This irritates me, we have friends every year that complain about the small size of their return or that they had do pay a small amount in...really we should be congratulating them on figuring out their withholdings correctly. the goal is to come as close to $0 as possible on your taxes, that means you took home absolutely as much as you possibly could during the year.

We'll be getting a return this year because there were just too many unknowns and while we could have changed our withholdings part way through the year, we didn't. We've already changed our W4s for this year so we should hit closer to that $0 mark.

jtmh2012 · February 2016

formerlyGDaisy09 said:

We'll be getting a return this year because there were just too many unknowns and while we could have changed our withholdings part way through the year, we didn't. We've already changed our W4s for this year so we should hit closer to that $0 mark.

I'm crossing my fingers at this point. We had a lot of life changes between 2013 and 2014 (new jobs, pregnancy, really good investment returns, etc) and ended up owing big time. Because I have investments, I usually can't file until about late February or March due to waiting for forms to show up. Ended up dropping both of us to Married/0 hoping to not owe this year and hoping we can increase some of those withholding deductions.

formerlyGDaisy09 · February 2016

jtmh2012 said:

formerlyGDaisy09 said:

We'll be getting a return this year because there were just too many unknowns and while we could have changed our withholdings part way through the year, we didn't. We've already changed our W4s for this year so we should hit closer to that $0 mark.

I'm crossing my fingers at this point. We had a lot of life changes between 2013 and 2014 (new jobs, pregnancy, really good investment returns, etc) and ended up owing big time. Because I have investments, I usually can't file until about late February or March due to waiting for forms to show up. Ended up dropping both of us to Married/0 hoping to not owe this year and hoping we can increase some of those withholding deductions.

It's so tricky. I've entered most our things into turbo tax to get an estimate (we use atax expert to file for a variety of reasons), we should actually be getting an embarassingly high amount back. We had a baby, installed solar panels on our roof, installed new energy efficient windows, H is in school, I paid a decent amount of interest on my student loans, we live in a town with high property tax, the windows that came out of our house ended-up being in excellent condition (poor installation was the culperate for all our leaking problems) so we donated a dozen large windows to habitat for humanity (they valued them around $3000, which is much larger than any cash donation we'd be able to make anywhere). it was just a whole bunch of stuff that we weren't sure how to plan for, and lots of it was a one-time thing.

jtmh2012 · February 2016

Well, so much for our hopes of getting anything back. We're getting $261 back from state, but owe $458 to federal. So still about $167 negative. At least that's the first go around. I'm going to do it again just to see what happens.

I know there's a lot on here that'd be happy with that, but I hate owing. Would prefer to have them owe me, but as little as possible. We're already at married and 0 on both sides and hate the idea of having more pulled out.

Having two jobs plus unearned income sucks.

AnnaFV · February 2016

jtmh2012 said:

Well, so much for our hopes of getting anything back. We're getting $261 back from state, but owe $458 to federal. So still about $167 negative. At least that's the first go around. I'm going to do it again just to see what happens.

I know there's a lot on here that'd be happy with that, but I hate owing. Would prefer to have them owe me, but as little as possible. We're already at married and 0 on both sides and hate the idea of having more pulled out.

Having two jobs plus unearned income sucks.

My husband and I both claim 0 and usually owe about this much as well. To break even we would have to either have more withheld from our checks or do big time donations

emily1004 · February 2016

AnnaFV said:

jtmh2012 said:

Well, so much for our hopes of getting anything back. We're getting $261 back from state, but owe $458 to federal. So still about $167 negative. At least that's the first go around. I'm going to do it again just to see what happens.

I know there's a lot on here that'd be happy with that, but I hate owing. Would prefer to have them owe me, but as little as possible. We're already at married and 0 on both sides and hate the idea of having more pulled out.

Having two jobs plus unearned income sucks.

My husband and I both claim 0 and usually owe about this much as well. To break even we would have to either have more withheld from our checks or do big time donations

Forgive me, but I'm at a loss, as to how this happens? How do you claim zero, and still owe? H and I both claim 2 and we end up usually breaking even. He gets paid weekly and I get paid every other week. My check is always the same, his is different every week.

formerlyGDaisy09 · February 2016

emily1004 said:

AnnaFV said:

jtmh2012 said:

Well, so much for our hopes of getting anything back. We're getting $261 back from state, but owe $458 to federal. So still about $167 negative. At least that's the first go around. I'm going to do it again just to see what happens.

I know there's a lot on here that'd be happy with that, but I hate owing. Would prefer to have them owe me, but as little as possible. We're already at married and 0 on both sides and hate the idea of having more pulled out.

Having two jobs plus unearned income sucks.

My husband and I both claim 0 and usually owe about this much as well. To break even we would have to either have more withheld from our checks or do big time donations

Forgive me, but I'm at a loss, as to how this happens? How do you claim zero, and still owe? H and I both claim 2 and we end up usually breaking even. He gets paid weekly and I get paid every other week. My check is always the same, his is different every week.

It depends on what your combined income is. if you're both earning near the top of one tax bracket your combined incomes are going to put you into a different tax bracket and mean that the payroll modle that's withholding your taxes at Married-0 is off.

hoffse · February 2016

emily1004 said:

AnnaFV said:

jtmh2012 said:

Well, so much for our hopes of getting anything back. We're getting $261 back from state, but owe $458 to federal. So still about $167 negative. At least that's the first go around. I'm going to do it again just to see what happens.

I know there's a lot on here that'd be happy with that, but I hate owing. Would prefer to have them owe me, but as little as possible. We're already at married and 0 on both sides and hate the idea of having more pulled out.

Having two jobs plus unearned income sucks.

My husband and I both claim 0 and usually owe about this much as well. To break even we would have to either have more withheld from our checks or do big time donations

Forgive me, but I'm at a loss, as to how this happens? How do you claim zero, and still owe? H and I both claim 2 and we end up usually breaking even. He gets paid weekly and I get paid every other week. My check is always the same, his is different every week.

It depends on how much you make combined and what your other deductions are. If you and your H both claim 2, then you are essentially claiming 6 personal exemptions between the two of you (one for yourself, plus 2 more, and then double that since each of you are doing it). Totally speculating here, but the reason this probably works for you guys is that your other deductions offset those extra exemptions you are claiming. Personal exemptions are only a few thousand each, and they are taken as a deduction rather than a tax credit.

This year H is withholding as a single, and I am withholding married 0. We're probably going to owe a few hundred. There are a whole host of things we can no longer deduct because of our AGI range. For instance, we no longer get the student loan interest deduction, even though we pay a LOT of money toward that each year. I've actually toyed with the idea of doing a cash-out re-fi to pay off our federal loans so that we can get that deduction back, and then use the tax savings to pay them off faster. We probably won't ever do that, but it's pretty tempting.

H and I can itemize, but our state income tax is fairly low, and we pay minimal property taxes. People who live in states with higher state income or property taxes will get more of their federal taxes back. We actually wouldn't be able to itemize at all if it wasn't for the mortgage interest deduction.

So there are a whole host of things that can change the numbers. Honestly, this is why I hate the personal exemption thing on W4s. You could have two families who are similarly situated in terms of income and the number of people they can actually claim, but they have to withhold very differently based on all their other deductions.

formerlyGDaisy09 · February 2016

It depends on how much you make combined and what your other deductions are. If you and your H both claim 2, then you are essentially claiming 6 personal exemptions between the two of you (one for yourself, plus 2 more, and then double that since each of you are doing it). Totally speculating here, but the reason this probably works for you guys is that your other deductions offset those extra exemptions you are claiming. Personal exemptions are only a few thousand each, and they are taken as a deduction rather than a tax credit.

This year H is withholding as a single, and I am withholding married 0. We're probably going to owe a few hundred. There are a whole host of things we can no longer deduct because of our AGI range. For instance, we no longer get the student loan interest deduction, even though we pay a LOT of money toward that each year. I've actually toyed with the idea of doing a cash-out re-fi to pay off our federal loans so that we can get that deduction back, and then use the tax savings to pay them off faster. We probably won't ever do that, but it's pretty tempting.

H and I can itemize, but our state income tax is fairly low, and we pay minimal property taxes. People who live in states with higher state income or property taxes will get more of their federal taxes back. We actually wouldn't be able to itemize at all if it wasn't for the mortgage interest deduction.

So there are a whole host of things that can change the numbers. Honestly, this is why I hate the personal exemption thing on W4s. You could have two families who are similarly situated in terms of income and the number of people they can actually claim, but they have to withhold very differently based on all their other deductions.

I have a question related to this. We live in an income tax free state (our property taxes are through the roof), however H interviewed for a job in another state that has income tax, so if her were to get the job he would have state income tax deducted. do we get to claim that tax on our federal return along with our property taxes? otherwise I think we need to figure those taxes out of whatever salary he's offered there to figure out if it's worth the switch...but if we get to claim them we'd probably have him add another exemption to try to even it out.

smerka · February 2016

You get to claim state income taxes or sales tax. Property taxes are a different line

formerlyGDaisy09 · February 2016

smerka said:

You get to claim state income taxes or sales tax. Property taxes are a different line

Thanks. but if we're itemizing there is a place to claim it, mainly that's what i'm asking. so we probably wouldn't get all of it back, but we wouldn't be working with significantly less take-home.

als1982 · February 2016

formerlyGDaisy09 said:

smerka said:

You get to claim state income taxes or sales tax. Property taxes are a different line

Thanks. but if we're itemizing there is a place to claim it, mainly that's what i'm asking. so we probably wouldn't get all of it back, but we wouldn't be working with significantly less take-home.

I've used both Turbo Tax and H&R Block online. Both will prompt you at the very beginning to identify in which states you earned income, and both will automatically enter and calculate the deductions.

hoffse · February 2016

Yes, state income tax is another deduction (on top of property taxes) if you are able to itemize. If you guys have always deducted your sales tax then you will have to choose between state income and sales tax.

Practically, most people don't bother to deduct state sales tax because it's pretty burdensome to document. It kind of makes you audit bate if you claim it, because the IRS can be pretty sure you haven't kept every receipt all year long to prove what you paid. Whereas deducting state income tax is really easy because it's on your W2 (or whatever) along with your federal taxes paid.

short+sassy · February 2016

hoffse said:

Yes, state income tax is another deduction (on top of property taxes) if you are able to itemize. If you guys have always deducted your sales tax then you will have to choose between state income and sales tax.

Practically, most people don't bother to deduct state sales tax because it's pretty burdensome to document. It kind of makes you audit bate if you claim it, because the IRS can be pretty sure you haven't kept every receipt all year long to prove what you paid. Whereas deducting state income tax is really easy because it's on your W2 (or whatever) along with your federal taxes paid.

I didn't realize it was one or the other, though I've never thought to deduct sales tax anyway. Hmmmm...but I might consider doing that this year. With the house rehab I did and my area's taxes being 9%, I spent a big chunk on sales tax. And I do have all the receipts.

But thanks for the warning it is audit-bate. That's something else I'll keep in mind.

hoffse · February 2016

short+sassy said:

hoffse said:

Yes, state income tax is another deduction (on top of property taxes) if you are able to itemize. If you guys have always deducted your sales tax then you will have to choose between state income and sales tax.

Practically, most people don't bother to deduct state sales tax because it's pretty burdensome to document. It kind of makes you audit bate if you claim it, because the IRS can be pretty sure you haven't kept every receipt all year long to prove what you paid. Whereas deducting state income tax is really easy because it's on your W2 (or whatever) along with your federal taxes paid.

I didn't realize it was one or the other, though I've never thought to deduct sales tax anyway. Hmmmm...but I might consider doing that this year. With the house rehab I did and my area's taxes being 9%, I spent a big chunk on sales tax. And I do have all the receipts.
But thanks for the warning it is audit-bate. That's something else I'll keep in mind.

Hey, if you can document it, then an audit is really NBD. I was audited last year. I sent in 1 letter with about 20 pages of substantiating documentation, and they just sent a letter back saying thanks, we're good. It took about 2 hours of my time to write the letter and gather everything, and there was no back-and-forth with the IRS about it.

It's just that most people can't actually document everything they claim on their taxes. The IRS knows this, so they tend to audit things like the sales tax deduction because it requires people to show receipts for all of it. Very few people are organized enough to keep all of that stuff.

hoffse · February 2016

@short+sassy, if you are going to pursue the sales tax thing, save your receipts for EVERYTHING all year long - including things like groceries. It all counts. If I were organized enough to do it, I would keep each month's receipts in an envelope for that month and add all the sales tax for that month up and write it on the front. Then keep all 12 months' envelopes in a big manila envelope or something so it's all together. Doing it that way will make adding everything up much faster when it's time to do your taxes.

I've just never done this myself because we order a lot of stuff tax-free on Amazon, Wayfair, etc. As soon as they start charging sales tax though, I'll probably begin tracking it. Alabama's income tax is really regressive, so our effective rate is only 3.5%. But our sales tax rate is also 9%, which is why I order so much stuff online.

short+sassy · February 2016

hoffse said:

@short+sassy, if you are going to pursue the sales tax thing, save your receipts for EVERYTHING all year long - including things like groceries. It all counts. If I were organized enough to do it, I would keep each month's receipts in an envelope for that month and add all the sales tax for that month up and write it on the front. Then keep all 12 months' envelopes in a big manila envelope or something so it's all together. Doing it that way will make adding everything up much faster when it's time to do your taxes.

I've just never done this myself because we order a lot of stuff tax-free on Amazon, Wayfair, etc. As soon as they start charging sales tax though, I'll probably begin tracking it. Alabama's income tax is really regressive, so our effective rate is only 3.5%. But our sales tax rate is also 9%, which is why I order so much stuff online.

Yeah, it's too late for many of my day-to-day receipts from last year. But I do have some of those also. However, I've always kept any receipt having to do with one of my rental units because that is an expense against that income.

I am going to start keeping all of my receipts for this year and organize them by month, like you suggested. It's very possible I'll end up buying another property this year that needs rehab work and it would be nice to deduct as much of the sales tax as I can.

So, if I ever have an in person IRS audit, does that mean I can bring a garbage bag full of receipts and just dump it on their desk? Okay, I'm just kidding. But that does sound seriously gratifying.

formerlyGDaisy09 · February 2016

hoffse said:

Yes, state income tax is another deduction (on top of property taxes) if you are able to itemize. If you guys have always deducted your sales tax then you will have to choose between state income and sales tax.

Practically, most people don't bother to deduct state sales tax because it's pretty burdensome to document. It kind of makes you audit bate if you claim it, because the IRS can be pretty sure you haven't kept every receipt all year long to prove what you paid. Whereas deducting state income tax is really easy because it's on your W2 (or whatever) along with your federal taxes paid.

no sales tax here either...live free or die.

hoffse · February 2016

short+sassy said:

hoffse said:

@short+sassy, if you are going to pursue the sales tax thing, save your receipts for EVERYTHING all year long - including things like groceries. It all counts. If I were organized enough to do it, I would keep each month's receipts in an envelope for that month and add all the sales tax for that month up and write it on the front. Then keep all 12 months' envelopes in a big manila envelope or something so it's all together. Doing it that way will make adding everything up much faster when it's time to do your taxes.

I've just never done this myself because we order a lot of stuff tax-free on Amazon, Wayfair, etc. As soon as they start charging sales tax though, I'll probably begin tracking it. Alabama's income tax is really regressive, so our effective rate is only 3.5%. But our sales tax rate is also 9%, which is why I order so much stuff online.

Yeah, it's too late for many of my day-to-day receipts from last year. But I do have some of those also. However, I've always kept any receipt having to do with one of my rental units because that is an expense against that income.
I am going to start keeping all of my receipts for this year and organize them by month, like you suggested. It's very possible I'll end up buying another property this year that needs rehab work and it would be nice to deduct as much of the sales tax as I can.
So, if I ever have an in person IRS audit, does that mean I can bring a garbage bag full of receipts and just dump it on their desk? Okay, I'm just kidding. But that does sound seriously gratifying.

Sort of - I would tape them to a piece of paper and photocopy everything and then send it to them media mail. You want to keep the originals.

But yes, a data dump would be totally within your rights, and I suspect the poor person who receives it would be so overwhelmed they would just be like, "Yeah, we're good" instead of sorting through all of it.

smerka · February 2016

I THINK most of the software does a background calculation for sales tax. They use a standard amount based on your income and your zip code. You can override it with the actual amount, but often the 'safe harbor' amount is more anyway. Similar to taking the standard mileage rate vs. taking actual vehicle expenses.

kmurphy2131 · February 2016

formerlyGDaisy09 said:

It depends on how much you make combined and what your other deductions are. If you and your H both claim 2, then you are essentially claiming 6 personal exemptions between the two of you (one for yourself, plus 2 more, and then double that since each of you are doing it). Totally speculating here, but the reason this probably works for you guys is that your other deductions offset those extra exemptions you are claiming. Personal exemptions are only a few thousand each, and they are taken as a deduction rather than a tax credit.

This year H is withholding as a single, and I am withholding married 0. We're probably going to owe a few hundred. There are a whole host of things we can no longer deduct because of our AGI range. For instance, we no longer get the student loan interest deduction, even though we pay a LOT of money toward that each year. I've actually toyed with the idea of doing a cash-out re-fi to pay off our federal loans so that we can get that deduction back, and then use the tax savings to pay them off faster. We probably won't ever do that, but it's pretty tempting.

H and I can itemize, but our state income tax is fairly low, and we pay minimal property taxes. People who live in states with higher state income or property taxes will get more of their federal taxes back. We actually wouldn't be able to itemize at all if it wasn't for the mortgage interest deduction.

So there are a whole host of things that can change the numbers. Honestly, this is why I hate the personal exemption thing on W4s. You could have two families who are similarly situated in terms of income and the number of people they can actually claim, but they have to withhold very differently based on all their other deductions.

I have a question related to this. We live in an income tax free state (our property taxes are through the roof), however H interviewed for a job in another state that has income tax, so if her were to get the job he would have state income tax deducted. do we get to claim that tax on our federal return along with our property taxes? otherwise I think we need to figure those taxes out of whatever salary he's offered there to figure out if it's worth the switch...but if we get to claim them we'd probably have him add another exemption to try to even it out.

I'm not sure which state he is potentially going to work in, but I know you live in NH. So if the state is Maine, I do not know their taxes in and out by any means but I do think that they tax your spouses income as well. Someone told me that they then give some deductions that might even it out? But you can get hit. I don't fully get how it works, I have never lived/worked in Maine but I worked right on the border for 2.5 years and treated a lot of patients who did. I heard some weird stories.

Vent: Taxes

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