Taxes

[brk81144]

Im curious what everyone does come tax time. I've previously done my own but finances are getting more complicated and I've kicked around hiring someone or using turbotax for the first time. Thoughts/suggestions?

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[The White Coat Investor]

I'd definitely recommend Turbotax over paper, even if just to do the math. But nothing wrong with hiring a pro. Just make sure you're getting something more than data entry for what you're paying. You can do data entry.

I've done my own for the last 15 years or so. I've basically had to learn one new schedule a year so it has never seemed overwhelming. The big advantage of doing that is that I learned the basics at least of the tax code. The disadvantage is a lot of times I follow the letter of the law rather than knowing what I am likely to get away with as many tax preparers do. But I can live with myself that way and don't have to worry about an audit. Even if I screwed something up, I can easily show I intended to follow the letter of the law as I did elsewhere in things the IRS had no way to catch me. For example, I get lots of income that isn't reported to the IRS by the person paying me. I actually report it. So the income on my 1040 is way more than they know about. They're not going to come after me for some tiny error once they see that.

And if it's a big error, I'll only owe taxes and penalties, not jail time.

 

[Arch Guillotti]

Tax thread in anesthesia forum

 

[GeneralVeers]

It depends on the complexity. If you have an LLC, a mortgage, investments, it's often worth your time to have an accountant do it. I had to do my own last year for various reasons, and it took a good 4-5 hours of my time to finish. It's almost worth the money just to not have to spend the time doing it.

 

[emergentmd]

If you are just an IC or W2, then you can do it yourself with turbo tax. Prob take you 1 hr if you have all of your info collected.

I did mine until I had 6 rentals, W2, IC, K1s, etc..... I pay about 1k but well worth not spending 10+ hrs working on it.

 

[da8s0859q]

I'm going to betray my ignorance, but:

For a typical income, without significant investment work, just a few anticipated tax documents (paid interest on a federal loan prior to refinancing privately, while in deferment / interest on bank accounts / etc), and with driving different hospitals for my group with mileage that would be too much of a hassle to count up to try and deduct, is there any utility in having someone do my taxes, or should I just do them myself?

Will be my first year filing out of residency and since the numbers will be very different with a half-year of an attending salary, I don't want to miss out on anything. Did TurboTax the last two years.

 

[The White Coat Investor]

I'm going to betray my ignorance, but:

For a typical income, without significant investment work, just a few anticipated tax documents (paid interest on a federal loan prior to refinancing privately, while in deferment / interest on bank accounts / etc), and with driving different hospitals for my group with mileage that would be too much of a hassle to count up to try and deduct, is there any utility in having someone do my taxes, or should I just do them myself?

Will be my first year filing out of residency and since the numbers will be very different with a half-year of an attending salary, I don't want to miss out on anything. Did TurboTax the last two years.

At this stage, it's about learning the tax code, not saving your time. So you might try doing it yourself, then go pay a pro to look it over for anything you missed. You're really looking for a tax education, not just to tick off a chore. In a few years, you'll be able to decide which way you want to go.

 

[mountainER]

just curious, anyone avoiding extra shifts just to prevent tax bracket bump? hit this problem this year with pay increase and actively avoided extra shifts as it would have cost me more money than the amount I would have made from it.

 

[BoardingDoc]

just curious, anyone avoiding extra shifts just to prevent tax bracket bump? hit this problem this year with pay increase and actively avoided extra shifts as it would have cost me more money than the amount I would have made from it.

That isn't how taxes work.

It's a MARGINAL tax rate. Meaning you only pay a higher tax rate on your income over a certain level.

e.g. lets say income over 100k is taxed at 30% and income below is at 20%. If you make 90k, you get taxed at 20%. If now, you make 110k, you don't get taxed at 30%. 100k gets taxed at 20%, and 10k gets taxed at 30%.

 

[jw3600]

just curious, anyone avoiding extra shifts just to prevent tax bracket bump? hit this problem this year with pay increase and actively avoided extra shifts as it would have cost me more money than the amount I would have made from it.

You can read an EKG but you can't understand tax brackets?

 

[shoal007]

Though once pushed into a higher tax rate it may not be worth the time/money anymore. My marginal rate is nearly 40percent. No thank you.


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[doctalaughs]

Though once pushed into a higher tax rate it may not be worth the time/money anymore. My marginal rate is nearly 40percent. No thank you.


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Very true. Especially since working 5 more hours per month is way harder and more likely to lead to burnout than the first 5 hours you worked that month.

I personally make sure not to work any hours that would lead to more than 466k per year since every dollar beyond that is about 50% taxed (federal + rest). If you estimate those extra hours are twice as hard as your first, it's kind of like working for 1/3 your normal pay-rate.


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[link2swim06]

That isn't how taxes work.

It's a MARGINAL tax rate. Meaning you only pay a higher tax rate on your income over a certain level.

e.g. lets say income over 100k is taxed at 30% and income below is at 20%. If you make 90k, you get taxed at 20%. If now, you make 110k, you don't get taxed at 30%. 100k gets taxed at 20%, and 10k gets taxed at 30%.

The only "exception" to this is possible loss of deduction. After you are above a certain dollar figure you can't deduct certain things. If you already make a over 200K its probably a moot point for almost all deductions.

But for example, if I exceed 80K this year as a resident (with moonlighting) I will lose my student interest deduction. Therefore, making 80K will need me less money than 79K for the year. This actually made me pick up one less moonlighting shift at the end of this year (because it would cost me money not make me money).

 

[emergentmd]

just curious, anyone avoiding extra shifts just to prevent tax bracket bump? hit this problem this year with pay increase and actively avoided extra shifts as it would have cost me more money than the amount I would have made from it.

I never understand why people, even the educated, can not understand how taxes work. Do people even look at their checks?

NO ONE ever does work, go into a higher bracket, and have a Negative Check. NEVER.

 

[dchristismi]

I do my own taxes, even now that I'm an IC, have rental properties, an i401k, multiple taxable accounts, and do a backdoor Roth every year.

As Whitecoat espouses, if you can learn renal physiology, you can learn the tax code. I much prefer to do it myself than have someone else screw it up - which happened the first year I ever filed in high school. I had a coupon for "free 1st filing" and H&R Block managed to screw it up. Yep, the most simple tax return possible... and I had to redo it because they managed to input the (very little) data wrong and my $97 return became a $0.97 return. So I had to redo it anyway. If they can screw that up, well, obviously my complicated return wouldn't be going there, but I'd rather do it myself.

I love Turbotax.

 

[Arcan57]

I tapped out my first year of attending life when I had jobs or domiciles in 5 states with a mix of W-2 and 1099 income while having both bought and sold a house and had a child. Before then I had used Turbotax and been fine. While I'm not the one filling out the forms, I am gathering the data that goes on them and do think there's value to knowing what's on the forms and what you can and can't deduct. It's extremely unlikely that your particular situation is going to be unique to the point where Turbotax and the ability to use Google will be insufficient to properly fill them out.

 

[bravotwozero]

LOL at the jean luc Picard face-palm meme. Nicely done.


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[GeneralVeers]

I did my own for the first 2 years out of residency. I had W2 income, one house, and very little in deductions or business expenses, so it basically was a matter of plugging my W2, and mortgage/401K tax document numbers into Turbotax. Once I started to get rental houses, investment income, and travel more for work the time investment increased exponentially and it made sense to have a tax professional do it.

 

[The White Coat Investor]

I never understand why people, even the educated, can not understand how taxes work. Do people even look at their checks?

NO ONE ever does work, go into a higher bracket, and have a Negative Check. NEVER.

There's actually a couple of really minor areas of the tax code where that isn't true (one was cited just above you) but for the most part you're right. I don't think I can remember them all off hand, but the student loan interest deduction and PPACA subsidies are two of them.

As far as those who don't want to make any money in the top tax bracket, my marginal rate will be the highest possible in my state this year for the first time. I'm finding the after-tax money is still pretty useful. I don't blame anyone for not wanting to work more, but there are ways to make more money without working more, like having your money work for you. Don't spend too much effort keeping your income down just to avoid a bigger tax bill.

 

[deleted109597]

Between my two physician family, the corporation (due to being part owner of another LLC), the kids, the loans, I find it easier. Yeah, I still have to go through and "itemize", but that's merely printing off my credit card statements and highlighting the business expenses. I've changed to using one card for business only at this point to make life easier.
I can write off the tax preparer's cost (so can you guys for the cost of turbotax for that matter). I like having someone that can sit during the audit on my behalf should one occur.

 

[Birdstrike]

Im curious what everyone does come tax time. I've previously done my own but finances are getting more complicated and I've kicked around hiring someone or using turbotax for the first time. Thoughts/suggestions?

I'm a firm believer in the "hire a pro" theory of tax preparation. You make enough money as an MD to have someone do this for you and if you've got someone good, there's a good chance they'll find an extra deduction or two, to offset part of all of what they're charging you. Unless, you enjoy doing it and you're very good at it, that's different. But ultimately, with the tax laws as complex as they are, and considering we get paid well as physicians, I think its a no brainer to have a good accountant do your taxes. Not only is it likely to take significant stress out of tax season, but a quality and reasonably conservative tax accountant is unlikely to make a mistake big enough to get you into any meaningful tax trouble with the IRS. With the complexity of my current tax situation (main job return, state, federal, K-1 for neighboring state, retirement stuff, kids 529s and other deductions) I can't say the same for myself.

Ask yourself which you'd rather do:

A-Work an extra shift and use the money so you not have to worry about tax preparation, or

B-Work one less shift and spend the free time on turbo tax?

I'm an "A."

 

[GeneralVeers]

I'm looking forward to the new tax rates: 12, 25, and 33%.

Trump and Congress will work quickly to enact these, and since they are budget items, they only need 51 votes in the Senate to pass.

 

[bravotwozero]

I'm looking forward to the new tax rates: 12, 25, and 33%.

Trump and Congress will work quickly to enact these, and since they are budget items, they only need 51 votes in the Senate to pass.

If I'm not mistaken, IC or corporate taxes are proposed to go down to 15% from 39%. If true, that affects ICs like me a lot more, than most of the ED docs that work w2


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[GeneralVeers]

If I'm not mistaken, IC or corporate taxes are proposed to go down to 15% from 39%. If true, that affects ICs like me a lot more, than most of the ED docs that work w2


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Depending on how it shakes out, there could be a big benefit for an IC set up as a corporation. Right now there isn't a significant tax benefit for doing so.

 

[Hercules]

If I'm not mistaken, IC or corporate taxes are proposed to go down to 15% from 39%. If true, that affects ICs like me a lot more, than most of the ED docs that work w2


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I have a hard time believing things will shake out that way. If that's the case then everyone will simply form their own LLCs and shave 2/3 off their taxes. Mind you I'm not complaining and will happily take the cut if offered-- I just don't think the government is going to happily give me all of that money back.


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[GeneralVeers]

I have a hard time believing things will shake out that way. If that's the case then everyone will simply form their own LLCs and shave 2/3 off their taxes. Mind you I'm not complaining and will happily take the cut if offered-- I just don't think the government is going to happily give me all of that money back.


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Correct. There's a reason that LLCs and SCorps pay similar taxes to individuals.

 

[deleted109597]

Depending on how it shakes out, there could be a big benefit for an IC set up as a corporation. Right now there isn't a significant tax benefit for doing so.

I didn't form one until buying into an FSED. Apparently the corporation part really makes a difference per my accountant. It isn't that expensive to do it, so whatevs.

 

[doctalaughs]

I'm looking forward to the new tax rates: 12, 25, and 33%.

Trump and Congress will work quickly to enact these, and since they are budget items, they only need 51 votes in the Senate to pass.

The new tax rates arent going to help most physicians much. I dont know about you, but most of my income is currently taxed at the marginal 33% or 35% rate (200-466k). After deductions etc only a very small amount of my income falls into the highest 40% bracket (over 466k AGI)

So with the new plan I *might* save 2% on this income which is OK but no huge deal. The real winners are those making many millions because the bulk of their income will fall from a 40% to a 33% rate (not to mention capital gains will always benefit the ultra-rich the most ).

Its all about where the tax brackets are defined. If they were making everything below 500k fall into the 25% bracket I'd be dancing in the streets. But if you understand the details it's clear this is a break for the wall-streeters, CEOs , hedge fund managers etc and not the physicians or upper-middle class that still work for an income.


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[GeneralVeers]

The new tax rates arent going to help most physicians much. I dont know about you, but most of my income is currently taxed at the marginal 33% or 35% rate (200-466k). After deductions etc only a very small amount of my income falls into the highest 40% bracket (over 466k AGI)

So with the new plan I *might* save 2% on this income which is OK but no huge deal. The real winners are those making many millions because the bulk of their income will fall from a 40% to a 33% rate (not to mention capital gains will always benefit the ultra-rich the most ).

Its all about where the tax brackets are defined. If they were making everything below 500k fall into the 25% bracket I'd be dancing in the streets. But if you understand the details it's clear this is a break for the wall-streeters, CEOs , hedge fund managers and not the physicians.


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I've estimated a $7K-$10K savings on my taxes. This is good for those of us who are IC because although we are paid more, we have to buy our own benefits, some of which like disability can't necessarily be deducted. At this point I'll take any kind of of tax relief, after 8 years of Obama making my financial life measurably worse.

 

[Birdstrike]

I'm looking forward to the new tax rates: 12, 25, and 33%.

Trump and Congress will work quickly to enact these, and since they are budget items, they only need 51 votes in the Senate to pass.

Pretty sure the proposed was 10, 15 and 25%. Doubt they'll go that low, but any cut is great.

 

[doctalaughs]

I've estimated a $7K-$10K savings on my taxes. This is good for those of us who are IC because although we are paid more, we have to buy our own benefits, some of which like disability can't necessarily be deducted. At this point I'll take any kind of of tax relief, after 8 years of Obama making my financial life measurably worse.

I'm sure I will save about the same amount (which amounts to about 1.5% of, for example, a 500k income).

But if you make 5 million a year you'll save about 7% taxes on about 4.5 million of income. Which is 315k saved or about 6.3% of your income.

Doesnt seem like a very balanced tax system to me.


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[GeneralVeers]

I'm sure I will save about the same amount (which amounts to about 1.5% of, for example, a 500k income).

But if you make 5 million a year you'll save about 7% taxes on about 4.5 million of income. Which is 315k saved or about 6.3% of your income.

Doesnt seem like a very balanced tax system to me.


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The vast majority of taxes are paid by those making > $250,000 per year. It's almost impossible to cut taxes for those who pay little or nothing. Almost any tax reform plan is going to result in the "largest" tax cuts for the ultra wealthy.

 

[GeneralVeers]

Pretty sure the proposed was 10, 15 and 25%. Doubt they'll go that low, but any cut is great.

That was Trump's proposal. The House version has 12, 25, and 33% which is likely closer to what we will get.

 

[doctalaughs]

The vast majority of taxes are paid by those making > $250,000 per year. It's almost impossible to cut taxes for those who pay little or nothing. Almost any tax reform plan is going to result in the "largest" tax cuts for the ultra wealthy.

I suppose. Unless they just had a flat tax. Or if we want to be more progressive, a flat tax on everything we consider above a "living" wage maybe 30k. Theres absolutely no reason the upper middle class should be paying the highest percentage of income, much higher than the ultra-wealthy.

I also dont support having a capital gains tax that is much lower than any earned income tax rate. Why should passive money be taxed at a lower rate than money that was worked for?

I think we could easily design a better tax system through a combination of vat and flat tax but that is too much to hope for.


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[Birdstrike]

That was Trump's proposal. The House version has 12, 25, and 33% which is likely closer to what we will get.

I'll take it

 

[GeneralVeers]

I'll take it

I'll take anything that (temporarily) reverses the PC bull****, Progressive, property-confiscating society we are becoming.

 

[WilcoWorld]

after 8 years of Obama making my financial life measurably worse.

I'm genuinely curious how this went down. Did your pay, your property value, and your stock market investments go down between 2008 and 2016? Mine all went up, by a lot. So is there something other than higher health insurance premiums that you're referring to, or did we have very different experiences over the last 8 years?

 

[GeneralVeers]

I'm genuinely curious how this went down. Did your pay, your property value, and your stock market investments go down between 2008 and 2016? Mine all went up, by a lot. So is there something other than higher health insurance premiums that you're referring to, or did we have very different experiences over the last 8 years?

My taxes went up about $5000 after his tax increases. My health insurance is a lot more expensive for worse coverage. So yes, he has made my life materially worse directly due to his policies that he championed versus Bush policies.

My salary is hard to gauge as I switched jobs, but it was decreasing due to greedy CMGs and not Obama.

 

[WilcoWorld]

Oh, nevermind.

 

[brk81144]

Update. Officially love turbotax. No idea why I was doing them through the IRS system all this time and feel like an accountant would have probably been a waste of money. Even doing things like the backdoor Roth were no problem.

 

[GeneralVeers]

Update. Officially love turbotax. No idea why I was doing them through the IRS system all this time and feel like an accountant would have probably been a waste of money. Even doing things like the backdoor Roth were no problem.

I used Turbotax my first 3 years out of Residency. It is easy to do if you have one W-2 source of income, one home, and minimal deductions and no other businesses. As your career/life progresses, things will get more complicated and an accountant will save you a lot of time (which equals money).