Getting hit with large tax return bill....

[katz]

Many of you have probably seen the news stories, FB posts in regards to this.

In addition to PC repair, I also run a courier/delivery business to keep things afloat. To say all of this adds up to a meager salary would be fairly accurate, especially in the last couple of years. So, here I sit, figuring up my taxes using H&R block software, watching the running total change before my eyes.

Seems that the "govment" has been hard at work, limiting the amount of deductions that one can take advantage of, so instead of the usually pleasant surprise of getting upwards of maybe 2K back, it has flipped and I now owe a little over $2600.00 to the feds. Haven't yet started on the state/local.

I know for a fact that it is due to these changes in the deductions, as my situation changes little from year to year, I've been doing my own returns, taking advantage of the deductions for over 20 years. it has NEVER turned out this bad.

One year, about 15 yrs. ago maybe, we had capital gains income of 32,000. In that year, I owed a tax bill of $1200.00, which is understandable.

So, a 2600.00 payment may not be much to many of you guys, but it is for me. In fact, the last 2 years have not been very good, income wise.

Have any of you started on your taxes yet, experienced this same situation?

 

[lan101]

This past year (so 2017 tax season) I paid $750 per quarter federal tax...don't know what it'll be this year. I have a local CPA do my taxes. His bill is about $150 or $175 but always has solid advice and his fee is a write off. I sure hope I'm not paying much more than that this upcoming year.

And yeah some on here will owe waaaaayyy more than that lol. I make peanuts too compared to the longer established businesses.

Do all of you pay sales tax in the US? I know I have to in my state.

 

[Diggs]

I've been dragging my feet getting started on my taxes. Now you really got me worried.....

 

[Mike McCall]

Oddly enough, this year we're getting back more than we ever have previously, nearly $3k between the two. Been really checking things before I send it, but everything looks good. Weird.

 

[sapphirescales]

I pay hundreds of thousands of dollars a year in taxes. With the recent changes I will be going over my taxes myself this year - a task I'm NOT looking forward to. I'm really hoping my tax bill will be lower this year, but I'm not counting on it. I just have to make sure that everything is done right and that my accountant truly is keeping up with all the changes in the tax laws.

 

[nerd2u]

Hundreds or thousands in taxes? Are you running a Multi million dollar business?

Sent from my SM-G870W using Tapatalk

 

[YeOldeStonecat]

I see a lot of those FB posts and stuff...people expecting to get back their usual..and not getting it.
They're not paying attention.
First...across the board, the withholding tax dollars was reduced last year. We enjoyed a boost in our paycheck when it happened. So the reduced tax was realized at that time..each and every week.

So instead of giving the government a tax free loan all year...like those people do that jack up their withholdings...so they get a return after the next year, it's being more honest and you're getting that reduction seen in your paycheck each week.

I for one, never like having a TON with held each week..having to wait til tax season to get a return. Nope...I'm not giving the gov a tax free loan, I can manage my money, I'd rather get a little more each week.

 

[DataMedics]

Perhaps you need to restructure your company to cut down on your tax burden. A few years back my accountant had me restructure to be an LLC opting to be taxed as an S-Corp. It added the necessity of paying myself as if I'm an employee, but now I don't get killed on so much self-employment taxes. Part of my pay goes on the W-2 as an "employee" and part gets paid as dividends (which don't require paying SSI, medicade, etc. taxes).

It saved me about $5-6K in taxes last year and with the new Trump "tax cuts" (which we all know are designed for rich people) I'll be saving even more this year.

 

[fencepost]

@nerd2u I suspect that most of that is business taxes for the shops rather than personal, and some of it may be "I send payments of hundreds of thousands of dollars" which would include taxes withheld from employee paychecks and sent in by the employer.

 

[katz]

I see a lot of those FB posts and stuff...people expecting to get back their usual..and not getting it.
They're not paying attention.
First...across the board, the withholding tax dollars was reduced last year. We enjoyed a boost in our paycheck when it happened. So the reduced tax was realized at that time..each and every week.

So instead of giving the government a tax free loan all year...like those people do that jack up their withholdings...so they get a return after the next year, it's being more honest and you're getting that reduction seen in your paycheck each week.

I for one, never like having a TON with held each week..having to wait til tax season to get a return. Nope...I'm not giving the gov a tax free loan, I can manage my money, I'd rather get a little more each week.

My income isn't like that, though. I operate on a cash/basis option, and my courier business gives me a 1099. My paycheck from that business remains pretty steady throughout the year, there are no tax withholdings for me. I deduct the mileage I drive and various supplies that I use...unlike a guy who works a "regular" job, punches time clock, deals with the standard W2/W4 situation. In that situation, yes, they would probably see a boost in their weekly paycheck.

 

[YeOldeStonecat]

So when running on a draw, what is your accountant doing to be creative for your expenses?

 

[Mike McCall]

For sole proprietors it makes little difference. That type of business income is considered personal income. You pay taxes on that money through the business.

 

[carmen617]

Actually I found taxes this year to be better than last, due to the 20% income pass through deduction. I'm a sole proprietor schedule C business, and my taxable income was much lower due to that deduction. I pay plenty in taxes, and (not to get into politics) am no fan of the current administration. But the tax law changes were beneficial to me.

 

[katz]

Actually I found taxes this year to be better than last, due to the 20% income pass through deduction. I'm a sole proprietor schedule C business, and my taxable income was much lower due to that deduction. I pay plenty in taxes, and (not to get into politics) am no fan of the current administration. But the tax law changes were beneficial to me.

I'm going to look at that. The tax software should have guided me thru that step, but I don't recall any mention of it.

 

[phaZed]

I see a lot of those FB posts and stuff...people expecting to get back their usual..and not getting it.
They're not paying attention.
First...across the board, the withholding tax dollars was reduced last year. We enjoyed a boost in our paycheck when it happened. So the reduced tax was realized at that time..each and every week.

So instead of giving the government a tax free loan all year...like those people do that jack up their withholdings...so they get a return after the next year, it's being more honest and you're getting that reduction seen in your paycheck each week.

Except that the majority of people are not seeing an increase in their paychecks... and the fact that most of the deductions that people relied on are not there (To the tune of some $1000's of dollars in many cases).

Don't worry though, the top 1% and corporations saw a decrease of $61,000 in their taxes... 'cause they need it?

Your ideas about the withholding tax are a Republican Talking point... largely from one Chuck Grassley. Scrutiny and fact would seem to prove him fully incorrect on his points.... we already knew taxes were going up for the middle class for the next decade before the bill was passed... and it's going to get worse every year for the next ~8 years.

They're performing wealth-redistribution to the top, bud.
No more writing off state and local taxes? Deductions removed? You can't simply write the losses off by stating, "Withholding tax"... everyone that is receiving a paycheck can see with their own eyes that their paycheck increase (if any at all) could not possibly make up for the difference in the numbers.

 

[YeOldeStonecat]

Except that the majority of people are not seeing an increase in their paychecks... and the fact that most of the deductions that people relied on are not there (To the tune of some $1000's of dollars in many cases).

Don't worry though, the top 1% and corporations saw a decrease of $61,000 in their taxes... 'cause they need it?

Your ideas about the withholding tax are a Republican Talking point... largely from one Chuck Grassley. Scrutiny and fact would seem to prove him fully incorrect on his points.... we already knew taxes were going up for the middle class for the next decade before the bill was passed... and it's going to get worse every year for the next ~8 years.]

Cherry pick media links as suits your campaign/cause...I'm just reporting from "in the trenches" as every day people see it. And quite directly..as an independent voter...not affiliated with any party...I've voted quite evenly across both parties as I see fit. And...living and working in one of the higher taxed states in the country.

We (the 5 of us)...are a mere small business, and I can only report what we saw "in real life".
My wife..she's a small business (single/sole/just her) "Realtor"...I can only report what she sees in her books (and our bank accounts). //shrug

Fact is, when it comes to "paychecks"...the withholding is up to either the individual, or the payroll person does. Of course...that's up to their competency, which I cannot account for. Some payroll people are on top of things (and lowered the withholding as they were supposed to), others aren't...they're just status quo (and didn't lower the withholding as they should of..and.."bummer" for those people).

 

[phaZed]

I'm an independent, too. If you see some contrary reports to what I posted then please, do so. You will not hurt my feelings.

I'm not cherry picking when Trump's tax bill laid out that this would happen... and now it's happening.

I'm going to be OK, too, as a business.. maybe even come out on top, but that is an exception to the rule... also in the Trump tax bill, business will hurt less or gain (From 35% to 21%).
If your only frame of reference is "the business owners I know" - then perhaps you need a larger sample size.

Most of the people I know are wholly unhappy with the taxes and the fact that they will be owing some $1000's of dollars instead of receiving a refund... but they're not business owners... which is the majority of this country. My best friend and his wife usually get a $6000ish tax return and they are now going to be paying $2500 and are already living paycheck to paycheck and might lose their home. His paycheck didn't go up. That's an $8500 difference in taxes YoY, bud. It wasn't because their withholding bracket was incorrect.. they owed more in totality due to the loss of deductions.

Fact is, when it comes to "paychecks"...the withholding is up to either the individual, or the payroll person does. Of course...that's up to their competency, which I cannot account for.

Well, see, that's the problem.. you're blaming the "people" for having a larger tax bill. Withholding has nothing to do with it and is a red-herring. If the taxes didn't go UP, their withholding bracket would have been sufficient. That's what you're missing... taxes effectively went UP for a majority of people... which is why they didn't get a refund or had to pay additional costs.

I understand your argument as:
(Hypothetical numbers)

I owe $10,000 to the Feds last year and under my chosen bracket they withheld $12,000 - I get a refund of $2000

-or-

I owe $10,000 to the Feds last year and under my chosen bracket they withheld $9000 - I must pay $1000


The problem with that is it's now something like:

Under the Trump plan I owe $16,000 and under the bracket I had picked for most of my life is now no longer sufficient to cover the increased costs and loss of deductions as they only withheld the typical $12,000... so I now owe $4000 to cover the full amount.

Sure, you could change your tax withholdings, but in the end, you will get a smaller paycheck in order to do so.. and a larger tax bill at the end of the year is still the reality regardless of how much you have withheld. The IRS bill is the IRS bill. Your withholding status doesn't change how much they charge you.

 

[katz]

they owed more in totality due to the loss of deductions.

 

[JRDtechnet]

HR Block software? I would ask fellow small business owners to recommend you a CPA, shouldn't be more than $250 Also I'm confused how you ever got a refund...were you purposely overpaying your quarterly? I never got a refund being a sole proprietor. I'm expecting my tax bill to be through the roof as admittedly I do a poor job with the quarterly estimates...that's to say I don't do them lol. The penalty is barely pocket change but probably should start as I believe the penalty is tied to the fed interest rate. Anyway had a pretty decent year and a few mutual funds in non-retirement accounts dumped some hefty (for me anyways) capital gains. I am interested to see how the 20% deduction on business income helps things.

 

[katz]

Also I'm confused how you ever got a refund...were you purposely overpaying your quarterly? I never got a refund being a sole proprietor.

I am a sole proprietor too. In the early years I was able to claim EIC credit (kids). They are grown now, so that deduction/credit is gone. What really helped me out was the deductions I could use for my courier business. I drive a lot of miles, and also use supplies for that business, and it has always worked out pretty well. The mileage is one of the biggest kickbacks. Just for giggles, I went it and adjusted my mileage, doubled it, and I still owed money! Doubling the mileage should bump it at least 1K or 2K in the other direction. Ridiculous!

And, I don't feel there is anything wrong with using H&R/ Turbotax, etc. They all guide you through it step by step. The software is written with the IRS regulations as a guide . A CPA can make a mistake just as easily as I can, and they aren't going to stand behind their work if they goof up causing you a penalty charge, I'm certain of that.

Using the software and having the running total displayed, you can see how the different entries affect your return. We pretty much donate the same amount to charities each year, and when I input those donation numbers, there was ZERO change in the running total.

I know the middle class has always gotten the short end of the stick, but this is off the charts. I know they media is attempting to explain it as we are getting "more each week in our paycheck," but that is simply not true. Maybe for some, I don't know, but that is not my situation.