OT: Update of last month's tax thread about less tax refund this year

[TheBigUglies]

Since the last thread turned into a political debate and is now 8 pages long I thought I would start a new one now that tax returns may have been filed. I made comments that I owe this year when I usually plan it to get a small refund. I am of the mindset of planning my fed withholding from our paychecks to come out pretty even by the end of the year as long as we don't owe. I usually get within a couple hundred dollars and get a refund. I don't like Uncle Sam holding large amounts of my money and then giving it back to me at the end of the year.

This year we owe like $2500. I originally thought because they changed everything around and we lost the personal exemptions which reduces the AGI. However, the tax we actually owe is almost the same as last year(a little more since we made a little more) so losing the personal exemptions and capping deductions at $10K was not the problem. After deeper analysis, the problem was, that even though we both claim 0 on our W-4s, the withholding from your paycheck has changed and less is being withheld. As a result, at the end of the year not enough was withheld from each paycheck which I didn't pay close enough attention to when it happened somewhere in 2018. Still sucks though.

 

[psuro]

I got back 40% of the refund I got last year.

I still claim everyone on this board as a dependent.

 

[PS4814]

After deeper analysis, the problem was, that even though we both claim 0 on our W-4s, the withholding from your paycheck has changed and less is being withheld.

Well yea - that's where the increase in paychecks that everyone ballyhooed about came from. We changed our withholding earlier in the year when the law went into effect and wound up with a refund for the first time in years. Now I'm not saying that a refund is a good thing as the gub'ment had our money, ideally I'd be okay with paying in a small amount every year, but just that we swung the other direction from what many people seem to be experiencing this year.

 

[stormingnorm]

The best thing that could happen wrt the governance of our country (OK, maybe not the BEST thing - but a very, very good thing) would be to eliminate automatic withholding at the source.

ie, No more of the employer withholding those tax dollars and forwarding to the IRS, etc. (Which, when you boil it down, is a completely screwed up and unrighteous system to begin with. Does your employer withhold the money for the Electric Bill - and forward it to the power company?)
If people were responsible for sending in a check each month, from their own bank account, with "their own" money (basically, what self-employed folks do now), two great things might happen:


1) The Average Joe would be forced into no longer being a complete illiterate idiot wrt how "taxes work".... and that would be a good thing. (And, believe me, as of right now, the "Average Joe" is about as illiterate as a moldy stump... in fact, even folks who one might generally consider to be well-educated and "smart" are often completely clueless wrt the largest expense we face in our lives. All the social media chatter about "refunds" is certainly proof of that )

2) After writing out those checks each month, and being forced to see - if nothing else - the magnitude of the impact of the tax system, more folks would start to demand some accountability from the nutsacks in Washington and Harrisburg.

 

[Rip_E_2_Joe_PA]

The people that have farms here in Tn and Kentucky and work a full time job are having to pay thousands of dollars instead of getting refunds per our accountant. Her example was that many expecting small refunds are owing, for example. $20,000. A lot depends on the size of the farm they own and operate. In the past 12 months family farms operated as additional income have been selling out to large corporation at a record pace. Their accountants must have tipped them off. One can surely expect that to arc even higher. Me, I have carry over losses so.... for the next 5 years. I can sell and not get hammered. After that..... I probably wont be around to care.

 

[PSUArnie]

Since the last thread turned into a political debate and is now 8 pages long I thought I would start a new one now that tax returns may have been filed. I made comments that I owe this year when I usually plan it to get a small refund. I am of the mindset of planning my fed withholding from our paychecks to come out pretty even by the end of the year as long as we don't owe. I usually get within a couple hundred dollars and get a refund. I don't like Uncle Sam holding large amounts of my money and then giving it back to me at the end of the year.

This year we owe like $2500. I originally thought because they changed everything around and we lost the personal exemptions which reduces the AGI. However, the tax we actually owe is almost the same as last year(a little more since we made a little more) so losing the personal exemptions and capping deductions at $10K was not the problem. After deeper analysis, the problem was, that even though we both claim 0 on our W-4s, the withholding from your paycheck has changed and less is being withheld. As a result, at the end of the year not enough was withheld from each paycheck which I didn't pay close enough attention to when it happened somewhere in 2018. Still sucks though.

Look at your effective tax rate and that should tell you all you need to know. I've typically received a small refund (~$2k) and this year owe (~$1500). As you stated, less tax was withheld which put more money in your pocket throughout the course of the year - hence not floating $'s to the government for a period of time. After running the #'s, my wife and I are going to change our withholding election (single claiming zero) which should pretty much break us even next year. And to my initial comment, our effective rate went down so comparing apples to apples the tax change was better for us.

 

[Connorpozlee]

Going to get our taxes done tonight. I fear the bottom line. My wife has a side gig business and she refuses to put money aside from it for taxes because “we need that money to pay for things.” I honestly don’t know any other way to tell her that she is spending money that we don’t really have because we are going to get nailed with the taxes, like we do every year.

 

[BBrown]

Since the last thread turned into a political debate and is now 8 pages long I thought I would start a new one now that tax returns may have been filed. I made comments that I owe this year when I usually plan it to get a small refund. I am of the mindset of planning my fed withholding from our paychecks to come out pretty even by the end of the year as long as we don't owe. I usually get within a couple hundred dollars and get a refund. I don't like Uncle Sam holding large amounts of my money and then giving it back to me at the end of the year.

This year we owe like $2500. I originally thought because they changed everything around and we lost the personal exemptions which reduces the AGI. However, the tax we actually owe is almost the same as last year(a little more since we made a little more) so losing the personal exemptions and capping deductions at $10K was not the problem. After deeper analysis, the problem was, that even though we both claim 0 on our W-4s, the withholding from your paycheck has changed and less is being withheld. As a result, at the end of the year not enough was withheld from each paycheck which I didn't pay close enough attention to when it happened somewhere in 2018. Still sucks though.

After all the hooplah and patting on the backs by the govt on their tax rebate the final outcome is pretty much a nothing burger for me. Didn't really help and didnt' really hurt.¯\_(ツ)_/¯

 

[PSU_Chicago]

Do not forget the tax changes generally were intended to help business owners, corporations and the > 1%.

 

[PSUinMICH]

Someone I know very well (they do make a lot of money was told by their tax adviser that they had to pay $20,000 more under the current tax code than they would have under the old tax code. On the other hand, my total income is less than the amount of taxes my friend paid, and I paid a little less tax under the current tax laws. So the current tax code certainly does not help all high income people.

 

[LionJim]

Someone I know very well (they do make a lot of money was told by their tax adviser that they had to pay $20,000 more under the current tax code than they would have under the old tax code. On the other hand, my total income is less than the amount of taxes my friend paid, and I paid a little less tax under the current tax laws. So the current tax code certainly does not help all high income people.

I’m guessing your friend lives in a state with high property taxes? There's now a lower threshold on how much property taxes you can deduct.

 

[colt21]

Since the last thread turned into a political debate and is now 8 pages long I thought I would start a new one now that tax returns may have been filed. I made comments that I owe this year when I usually plan it to get a small refund. I am of the mindset of planning my fed withholding from our paychecks to come out pretty even by the end of the year as long as we don't owe. I usually get within a couple hundred dollars and get a refund. I don't like Uncle Sam holding large amounts of my money and then giving it back to me at the end of the year.

This year we owe like $2500. I originally thought because they changed everything around and we lost the personal exemptions which reduces the AGI. However, the tax we actually owe is almost the same as last year(a little more since we made a little more) so losing the personal exemptions and capping deductions at $10K was not the problem. After deeper analysis, the problem was, that even though we both claim 0 on our W-4s, the withholding from your paycheck has changed and less is being withheld. As a result, at the end of the year not enough was withheld from each paycheck which I didn't pay close enough attention to when it happened somewhere in 2018. Still sucks though.

I tried to explain this in the other thread - someone questioned me but here is exactly what happened.

When the "tax cut" went into effect, the Administration (Trump) put pressure on the IRS to also change the withholding tables. Their reason being that they wanted people to see more in their weekly paychecks so they felt like the tax cut was bigger than it was.

On the surface they felt that more money in the paycheck stirs the economy - no disagreement there.

The problem comes in when this wasn't explained and people don't understand, they just go on their happy way thinking "Wow, I'm getting $50 more/pay and I'm still going to get my $1,000 refund.

Well, low and behold, since only $10 of that $50 more per pay was the actual tax cut and the rest was the adjustment to the tables - that $1,000 refund now becomes a $1,080 tax due.

a lot of people understood and adjusted
some didn't but could afford it and will adjust and move on

HOWEVER, there are a lot of folks who can't even begin to understand any of this and are pretty upset right about now

 

[LionJim]

I tried to explain this in the other thread - someone questioned me but here is exactly what happened.

When the "tax cut" went into effect, the Administration (Trump) put pressure on the IRS to also change the withholding tables. Their reason being that they wanted people to see more in their weekly paychecks so they felt like the tax cut was bigger than it was.

On the surface they felt that more money in the paycheck stirs the economy - no disagreement there.

The problem comes in when this wasn't explained and people don't understand, they just go on their happy way thinking "Wow, I'm getting $50 more/pay and I'm still going to get my $1,000 refund.

Well, low and behold, since only $10 of that $50 more per pay was the actual tax cut and the rest was the adjustment to the tables - that $1,000 refund now becomes a $1,080 tax due.

a lot of people understood and adjusted
some didn't but could afford it and will adjust and move on

HOWEVER, there are a lot of folks who can't even begin to understand any of this and are pretty upset right about now

Isn’t this common knowledge by now?

 

[BBrown]

Isn’t this common knowledge by now?

No.

 

[gamblepsu]

I got back 40% of the refund I got last year.

I still claim everyone on this board as a dependent.

Mine was about 40 percent too. The actual tax I paid though was almost exactly the same. I spent two hours gathering up my de ductions and ended up just short so I took the standard deduction. I feel like the standard deduction went up just enough to catch me but not enough to have the tax cut actually benefit me.

 

[colt21]

Isn’t this common knowledge by now?

It will be by April 15th !!

 

[PSUinMICH]

I’m guessing your friend lives in a state with high property taxes? There's now a lower threshold on how much property taxes you can deduct.

The state nor so much; the area they live in definitely. Best schools in state etc also a 6% state income tax. This all was limited to a $10,000 deduction. My only point was the tax laws definitely didn't favor all (or maybe most) high income tax payers.

 

[CF LION]

I just dropped off all my tax stuff to my accountant. Not sure what to expect, but I think I'm good this year but will need to make some changes next year. I can still file as a Qualifying Widower with Dependent Child (two years post death year of spouse). Next year I'll have to file as single, so that combined with the SALT limits makes me think I'm going to feel it.

 

[psuro]

The best thing that could happen wrt the governance of our country (OK, maybe not the BEST thing - but a very, very good thing) would be to eliminate automatic withholding at the source.

ie, No more of the employer withholding those tax dollars and forwarding to the IRS, etc. (Which, when you boil it down, is a completely screwed up and unrighteous system to begin with. Does your employer withhold the money for the Electric Bill - and forward it to the power company?)
If people were responsible for sending in a check each month, from their own bank account, with "their own" money (basically, what self-employed folks do now), two great things might happen:


1) The Average Joe would be forced into no longer being a complete illiterate idiot wrt how "taxes work".... and that would be a good thing. (And, believe me, as of right now, the "Average Joe" is about as illiterate as a moldy stump... in fact, even folks who one might generally consider to be well-educated and "smart" are often completely clueless wrt the largest expense we face in our lives. All the social media chatter about "refunds" is certainly proof of that )

2) After writing out those checks each month, and being forced to see - if nothing else - the magnitude of the impact of the tax system, more folks would start to demand some accountability from the nutsacks in Washington and Harrisburg.

...the Average Joe knows drugs are bad and illegal, but yet they still purchase and use them....the Average Josephine knows that paying a con man $500,000 to fake her kid's College Board scores and then claiming it as a tax deduction is illegal, but she does it anyway...

 

[Judge Smails]

How much does it cost to "have your taxes done" these days? I've always done my own. $1k?

 

[kgilbert78]

No.

Concur. We'll owe slightly north of $1K, once I get it all figured out. Part of that is due to one of my charitable endeavors changing though (about $200-300).

 

[PSU_Chicago]

I’m guessing your friend lives in a state with high property taxes? There's now a lower threshold on how much property taxes you can deduct.

Yep ... if you live in the states with high income, property, etc taxes ... you got killed. Plus IMO salary man (work a job for a salary) gets killed in the Trump tax plan.

 

[84_PSU_ADMJ]

I always owe this YEAR a small refund. My Brother is raging as he got slaughtered and he is a high wage earner. I am UNDER 100k

 

[Cosmos]

The people that have farms here in Tn and Kentucky and work a full time job are having to pay thousands of dollars instead of getting refunds per our accountant. Her example was that many expecting small refunds are owing, for example. $20,000. A lot depends on the size of the farm they own and operate. In the past 12 months family farms operated as additional income have been selling out to large corporation at a record pace. Their accountants must have tipped them off. One can surely expect that to arc even higher. Me, I have carry over losses so.... for the next 5 years. I can sell and not get hammered. After that..... I probably wont be around to care.

How can you have carry over losses in this market?

 

[Cosmos]

...the Average Joe knows drugs are bad and illegal, but yet they still purchase and use them....the Average Josephine knows that paying a con man $500,000 to fake her kid's College Board scores and then claiming it as a tax deduction is illegal, but she does it anyway...

Now PSuro, I do believe Storming Norman Schwarzkopf has a point. Make people pay the guv'ment directly rather than have employers withhold it will demand more accountability from guv'ment. That's probably why it's done that way!

 

[LaJolla Lion]

Going to get our taxes done tonight. I fear the bottom line. My wife has a side gig business and she refuses to put money aside from it for taxes because “we need that money to pay for things.” I honestly don’t know any other way to tell her that she is spending money that we don’t really have because we are going to get nailed with the taxes, like we do every year.

Well if you ever figure out the way to tell her and she listens....I'll pay to hear the solution!!!!

 

[Rip_E_2_Joe_PA]

How can you have carry over losses in this market?

When you are building a company from scratch meaning physically build and the capitalization is expensive as hell.... It's easy.

 

[green2623]

The best thing that could happen wrt the governance of our country (OK, maybe not the BEST thing - but a very, very good thing) would be to eliminate automatic withholding at the source.

ie, No more of the employer withholding those tax dollars and forwarding to the IRS, etc. (Which, when you boil it down, is a completely screwed up and unrighteous system to begin with. Does your employer withhold the money for the Electric Bill - and forward it to the power company?)
If people were responsible for sending in a check each month, from their own bank account, with "their own" money (basically, what self-employed folks do now), two great things might happen:


1) The Average Joe would be forced into no longer being a complete illiterate idiot wrt how "taxes work".... and that would be a good thing. (And, believe me, as of right now, the "Average Joe" is about as illiterate as a moldy stump... in fact, even folks who one might generally consider to be well-educated and "smart" are often completely clueless wrt the largest expense we face in our lives. All the social media chatter about "refunds" is certainly proof of that )

2) After writing out those checks each month, and being forced to see - if nothing else - the magnitude of the impact of the tax system, more folks would start to demand some accountability from the nutsacks in Washington and Harrisburg.

As a small business owner, I completely agree. As for gov't employees, they should save for their own health care and retirement themselves, the taxpayer should not have to fund their extravagances. Even better would be if they had regular jobs and took their vacation days to go do their legislation. nuff said.

 

[sluggo72]

How much does it cost to "have your taxes done" these days? I've always done my own. $1k?

Depends who and where. HR block can be very expensive. Large accounting firms the same. A single sole practitioner can be cheaper than all of the above. I paid $350 last year. I have about 5 or more schedules to file plus the state
I figure whatever I pay it’s worth it as I put that guy on retainer for a year

 

[sluggo72]

How can you have carry over losses in this market?

Maybe not stock market losses. Or from losses from other years since you can only write off $3000 more than your gains the rest you carry forward

 

[Ranger Dan]

My wife and I both changed from 2 withholding deductions to 1 (we have no kids)

 

[interrobang]

What I owe is cut in half by the new tax laws.

 

[CoastGuard2018]

Since the last thread turned into a political debate and is now 8 pages long I thought I would start a new one now that tax returns may have been filed. I made comments that I owe this year when I usually plan it to get a small refund. I am of the mindset of planning my fed withholding from our paychecks to come out pretty even by the end of the year as long as we don't owe. I usually get within a couple hundred dollars and get a refund. I don't like Uncle Sam holding large amounts of my money and then giving it back to me at the end of the year.

This year we owe like $2500. I originally thought because they changed everything around and we lost the personal exemptions which reduces the AGI. However, the tax we actually owe is almost the same as last year(a little more since we made a little more) so losing the personal exemptions and capping deductions at $10K was not the problem. After deeper analysis, the problem was, that even though we both claim 0 on our W-4s, the withholding from your paycheck has changed and less is being withheld. As a result, at the end of the year not enough was withheld from each paycheck which I didn't pay close enough attention to when it happened somewhere in 2018. Still sucks though.

I got back a $1100 more.

 

[The Song Remains the Same]

Well if you ever figure out the way to tell her and she listens....I'll pay to hear the solution!!!!

That would be additional reportable income.

 

[stater02]

I tried to explain this in the other thread - someone questioned me but here is exactly what happened.

When the "tax cut" went into effect, the Administration (Trump) put pressure on the IRS to also change the withholding tables. Their reason being that they wanted people to see more in their weekly paychecks so they felt like the tax cut was bigger than it was.

On the surface they felt that more money in the paycheck stirs the economy - no disagreement there.

The problem comes in when this wasn't explained and people don't understand, they just go on their happy way thinking "Wow, I'm getting $50 more/pay and I'm still going to get my $1,000 refund.

Well, low and behold, since only $10 of that $50 more per pay was the actual tax cut and the rest was the adjustment to the tables - that $1,000 refund now becomes a $1,080 tax due.

a lot of people understood and adjusted
some didn't but could afford it and will adjust and move on

HOWEVER, there are a lot of folks who can't even begin to understand any of this and are pretty upset right about now

You explained this pretty well. It’s the concept of “mental accounts”. Dick Thaler won a Nobel Prize for his work in this field a few years ago.

 

[Connorpozlee]

That would be additional reportable income.

Taxes done. Did not owe nearly as much as I anticipated. For the record, I was wrong again.

 

[The Song Remains the Same]

Taxes done. Did not owe nearly as much as I anticipated. For the record, I was wrong again.

On certain things like this it is good to be wrong...

 

[colt21]

You explained this pretty well. It’s the concept of “mental accounts”. Dick Thaler won a Nobel Prize for his work in this field a few years ago.

Cool, what’s the Lion’s Den equivalent of the NPP?!

 

[psualt]

Someone I know very well (they do make a lot of money was told by their tax adviser that they had to pay $20,000 more under the current tax code than they would have under the old tax code. On the other hand, my total income is less than the amount of taxes my friend paid, and I paid a little less tax under the current tax laws. So the current tax code certainly does not help all high income people.

I 100% believe what you are saying but sometimes the explanations given to them (or perhaps what they hear) are just plain wrong. Believe me when I tell you, as a tax adviser people will believe just about anything I tell them if they want to hear it. For this reason, I am normally very careful about how I explain things to them. I am fascinated by reviewing year over year changes and even with the facts you give it interests me how this could be true especially as high earners made out very well and you’re not in a super high tax area. There’s always an outlier somewhere. Not so great for your friend.

 

[psualt]

I just dropped off all my tax stuff to my accountant. Not sure what to expect, but I think I'm good this year but will need to make some changes next year. I can still file as a Qualifying Widower with Dependent Child (two years post death year of spouse). Next year I'll have to file as single, so that combined with the SALT limits makes me think I'm going to feel it.

You will feel it next year. Check your W-4 if not self employed.