Tax Returns

[297point1]

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Well here's my update and it's not good news. My MTM company made about 50% more than I anticipated it would in 2012, and the additional income (which was all in December) bumped me into a higher tax bracket. I made quarterly tax payments, but we're still going to owe. Worst case scenario from the accountant is that we might owe $10,000 😱 (federal/state/local) but he's still working on it. And we are looking for some more deductions too!

Wow; feeling better now about my $31 refund.

Any chance you can have a few more kids quickly and back date their birth certificates to 2012? 🙂

 

[All4MyDaughter]

Wow; feeling better now about my $31 refund.

Any chance you can have a few more kids quickly and back date their birth certificates to 2012? 🙂

Maybe get my OBGYN to amend the birth certificate to say I had triplets rather than a singleton? It could work.

Wish I could deduct all of my student loan interest. That would help!

 

[rxlea]

Maybe get my OBGYN to amend the birth certificate to say I had triplets rather than a singleton? It could work.

Wish I could deduct all of my student loan interest. That would help!

Just have 10 medicaid babies. Write off your cocaine dispensing services.

 

[All4MyDaughter]

Just have 10 medicaid babies. Write off your cocaine dispensing services.

I wonder if I could adopt you and count you as a dependent retroactively?

 

[rxlea]

I wonder if I could adopt you and count you as a dependent retroactively?

I don't see why not 😀

 

[njac]

I'm scared to do mine. I have little to no deductions. Based on just raw numbers from the last paystub of 2012 I don't think they took enough out.

I claimed 0, and then once they stopped taking social security/disability out I paid an extra $600/check in federal. I will be so annoyed if I owe.

I honestly don't care what the final amount paid in taxes is, I just don't want to owe anything. What is the point of having it deducted from your paycheck if they aren't taking what they need?

 

[IlDestriero]

Any way you can push the December earnings back a bit so they wind up in January? It's a shame if all the hard work just winds up in that higher bracket.

You are aware that the US has a progressive tax system, right?
For example, lets say the tax on 0-100k is 20% and anything over 100k is 25%.
If your adjusted income is 100k you pay 20k in taxes. If you earn over 100k, you pay 20k (20%) on the first 100k in earnings and then 25% on the income over 100k. Getting "bumped into a higher tax bracket by some marginal amount it's essentially irrelevant. You are only paying the higher tax on the amount in that higher bracket.
This seems to be a commonly confused point.

 

[pezdispenser]

I posted this in the Finance and Investment forum but there's not much traffic there. I'll repost and update here because it seems relevant.

The best way to calculate your tax withholding is to keep a spreadsheet of each paycheck so you can keep a running total throughout the year. I made one that automatically calculates my taxes on each paycheck. So I can change my W-4 withholding allowances, add overtime or change my 401(k) contributions and it will automatically recalculate the taxes.

I also put my interest, dividends, capital gains and deductions on it. Then at the bottom there is a calculation which will show if am due a refund or owe tax at the end of the year.


So, you can go to paycheckcity.com to calculate the tax withheld on ONE paycheck.

Or, the tax withholding tables are at IRS Notice 1036. And the formula I made is:

=((([biweekly salary]-[insurance]-[401(k)])*26-3900*[W-4 allowances]-2200-87850)*0.28+17891.25)/26

Substitute the "2200-87850)*0.28+17891.25" with the numbers out of IRS Notice 1036 for your tax bracket. The 2200 is there because the tax withholding tables count the first W-4 allowance as the $6,100 standard deduction, and each allowance after that as a $3,900 exemption.

Make a spreadsheet with all 26 paychecks for the year with columns for:

Gross income
Taxable income (gross minus insurance and 401(k))
Federal tax (use the formula above)
State income tax
Social Security (6.2% up to $113,700 gross income minus insurance)
Medicare (1.45% gross income minus insurance)
Insurance
401(k)
Net

and total each column.


The next part is figuring your annual tax as you do on your tax return. This varies a lot depending on your circumstances. But basically you have your:

gross - insurance - 401(k)
+interest
+dividends
+short term capital gains
-deductions
-exemptions ($3,900 each)
==========
taxable income

Work out the tax on this using the standard tax tables. e.g.:

=([taxable income] - 87850) * 0.28 + 17891.25

Then:
+tax on long term capital gains and qualified dividends (usually 15%)
- tax credits
===========
total tax

Now subtract the tax WITHHELD from your paychecks. If the answer is positive, this is the amount you owe. If it is negative this is the amount you will be refunded.

I adjust the number of W-4 withholding allowances in my spreadsheet until the amount refunded or owed is close to $0. Do not set your W-4 withholding allowances so high that you owe a massive amount more than $1,000 on your tax return, because you could be penalized/fined by the IRS.

 

[Sparda29]

I'm thinking of going part-time at the hospital and full-time at the independent. That way I keep the union and medical benefits at the hospital, and get paid cash money at the independent. **** the IRS.

 

[Muse600]

I have a lot of deductions. a lot.

which deductions?!?

I'm not self employed...working retail for a chain, and only taking home 54% after...claiming zero brings back ~$3k, church donations, the $150 to renew my MA RPh license, $75 to do CE credits, and some vehicle registration fees in CA were tax deductible...but that's it!

I have a friend who's an attorney and pays 8% tax federal tax because he co-owns a motel with his family.

Unfortunately I don't have the $200,000 in collateral to get a business loan on anything, or the 20% down you need to get into a $800,000 3-family home in Long Beach CA where I live, so I'm looking to build those savings with with some sort of tax dexuction. Unfortunately the $17k I paid post-tax in student loan interest last year did not count for a cent since my income was > $75k

I've heard a couple things:
1.) just open an LLC
2.) get a real estate license
3.) - you can't deduct anything unless your business is your primary source of income

 

[owlegrad]

I'm thinking of going part-time at the hospital and full-time at the independent. That way I keep the union and medical benefits at the hospital, and get paid cash money at the independent. **** the IRS.

Sounds smart. 👍

 

[Sparda29]

Sounds smart. 👍

The one problem I see is that if they audit my student loan payments and notice I'm paying more every year than I am reporting as income.

 

[Momus]

You gonna spend the all the cash made from independent and bank the part time job? Every time you do a deposit, you create a paper trail.

If you think for 40+ years, IRS is not going to audit you then by all means do it.

 

[Ackj]

Put it all offshore, retire at 40, leave the country, and live on the beach somewhere in South America.

 

[Sparda29]

Put it all offshore, retire at 40, leave the country, and live on the beach somewhere in South America.

I'd go with Lebanon instead.

 

[Pharmacy Kid]

which deductions?!?

I'm not self employed...working retail for a chain, and only taking home 54% after...claiming zero brings back ~$3k, church donations, the $150 to renew my MA RPh license, $75 to do CE credits, and some vehicle registration fees in CA were tax deductible...but that's it!

I have a friend who's an attorney and pays 8% tax federal tax because he co-owns a motel with his family.

Unfortunately I don't have the $200,000 in collateral to get a business loan on anything, or the 20% down you need to get into a $800,000 3-family home in Long Beach CA where I live, so I'm looking to build those savings with with some sort of tax dexuction. Unfortunately the $17k I paid post-tax in student loan interest last year did not count for a cent since my income was > $75k

I've heard a couple things:
1.) just open an LLC
2.) get a real estate license
3.) - you can't deduct anything unless your business is your primary source of income

1. Donations to church and non-profit organizations
2. Some of my student loan interest
3. Professional membership fees/midyear fees
4. some uniforms
5. costs of looking for a new position
6. sales tax

 

[PENVK]

Just have a few kids and ur golden.

Sent from my SAMSUNG-SGH-I747 using Tapatalk 2

 

[kwakster928]

how is that possible?

Put more money into 401K, deduct mortgage interest + deduct state income tax + deduct city wage tax + deduct local wage tax + deduct property tax + deduct school tax + deduct modest charitable donation + social security refund = Uncle Sam owes me 3K.

 

[Doctor M]

a little over 2 weeks left. Have you all done your taxes?

 

[owlegrad]

a little over 2 weeks left. Have you all done your taxes?

Yup, and I did much better than I thought I might. I had quite a bit of 1099 income to claim that I didn't properly plan for, but it turned out ok in the end! 😎

Sadly next year I won't have nearly as much to claim in that category. Though as a pharmacist hopefully I will have more by way of W2 income. 😀

 

[Momus]

49k fed + 19 k state taxes paid fml... I got 1k back after reporting all dividend and interest income...

 

[pezdispenser]

Finally did mine and getting $300 back. I changed my W-4 withholding several times between 0 and 4 last year, targeting to OWE a few hundred dollars. However, the sales tax deduction came through in the last minute fiscal cliff deal, so I got to deduct another $2,500, resulting in the refund. I'm not complaining 🙂

Federal tax was 18% of my total income not including 401(k), which I feel is reasonable, perhaps even a little low.

 

[spacecowgirl]

Paying in for the first time ever. Despite having a baby unicorn last year.

 

[Doctor M]

Finally did mine and getting $300 back. I changed my W-4 withholding several times between 0 and 4 last year, targeting to OWE a few hundred dollars. However, the sales tax deduction came through in the last minute fiscal cliff deal, so I got to deduct another $2,500, resulting in the refund. I'm not complaining 🙂

Federal tax was 18% of my total income not including 401(k), which I feel is reasonable, perhaps even a little low.

Our LLC does not pay tax, so my partner and I pay all he taxes on our personal income taxes. Holy hell!!! 28% tax bracket, 6 figure taxes. FML FML FML FML FML...

 

[njac]

Got nearly $10K back. Federal was about 19%. Not too shabby for zero children, no real estate, can't write off loan interest, etc.

I'll quit my bitching.

I was smart enough to increase the withheld once they stopped taking out ssi and disability. Think I would've broken even without that adjustment.

 

[Momus]

Fed effective tax rate 22.45%... wth

 

[Old Timer]

Our LLC does not pay tax, so my partner and I pay all he taxes on our personal income taxes. Holy hell!!! 28% tax bracket, 6 figure taxes. FML FML FML FML FML...

But you are shielding it from the business income tax and that's why it passes through to your personal income. You should be a C- corp and not pay all that personal tax.

 

[IlDestriero]

Our LLC does not pay tax, so my partner and I pay all he taxes on our personal income taxes. Holy hell!!! 28% tax bracket, 6 figure taxes. FML FML FML FML FML...

Real men pay more than 2x the average family income in federal taxes after deductions.
Man up buttercup.

 

[Doctor M]

Real men pay more than 2x the average family income in federal taxes after deductions.
Man up buttercup.

Ha! thats Dr. Buttercup to you snowflake 😉

 

[All4MyDaughter]

Dr. M... You need to reorganize as a corporation.

 

[Doctor M]

Dr. M... You need to reorganize as a corporation.

We are an S-corp

 

[All4MyDaughter]

We are an S-corp

You said LLC.

 

[Doctor M]

You said LLC.

We are an LLC filing as an S-corp.

 

[All4MyDaughter]

We are an LLC filing as an S-corp.

Do you pay yourself a salary? Dividends?

 

[Doctor M]

Do you pay yourself a salary? Dividends?

Yes, pay a salary and distributions.

 

[All4MyDaughter]

Yes, pay a salary and distributions.

Are you paying too much salary? My accountant says pay the least possible amount of salary and do the rest as dividends, since they aren't subject to FICA.

 

[Doctor M]

Are you paying too much salary? My accountant says pay the least possible amount of salary and do the rest as dividends, since they aren't subject to FICA.

Whats the least you can pay before the IRS says um, no no, you must pay fica? Our tax is ridiculous cause we had a really good year last year. We pay ourselves a normal salary and then pay out throughout the year.

 

[All4MyDaughter]

Whats the least you can pay before the IRS says um, no no, you must pay fica? Our tax is ridiculous cause we had a really good year last year. We pay ourselves a normal salary and then pay out throughout the year.

Probably market rate for a pharmacist.

Are you actually paying dividends or just taking draws? Did you pay FICA on your distributions?

 

[Doctor M]

Probably market rate for a pharmacist.

Are you actually paying dividends or just taking draws? Did you pay FICA on your distributions?

Draws. As far as i can see, we did not pay FICA on the draws. But then again, im not a CPA and our CPA is pretty good and tells me to sign on the line and write that check...

 

[All4MyDaughter]

Draws. As far as i can see, we did not pay FICA on the draws. But then again, im not a CPA and our CPA is pretty good and tells me to sign on the line and write that check...

You need to look closely at your returns. My CPA messed mine up this year (simple error) and doubled my tax liability. Had to file an amended return.

It should be simple enough to look at your return and see if you are paying FICA on your draws. I have an LLC and pay FICA on my draws. Draws aren't the same as corporate dividends. Your accountant should be educating you on all of this.

 

[Doctor M]

You need to look closely at your returns. My CPA messed mine up this year (simple error) and doubled my tax liability. Had to file an amended return.

It should be simple enough to look at your return and see if you are paying FICA on your draws. I have an LLC and pay FICA on my draws. Draws aren't the same as corporate dividends. Your accountant should be educating you on all of this.

Time for a new accountant?

 

[All4MyDaughter]

Time for a new accountant?

I'll probably do it myself next year, now that I know how it works.

 

[Doctor M]

I'll probably do it myself next year, now that I know how it works.

Thought about that but our CPA reconciles everything for us every 3 months. Hes good peeps and he uses our pharmacy so we stay with him. He's pretty good too. But i will ask him about the FICA. Ive never paid so much taxes that it is kinda shell shocking!!