Getting hit with large tax return bill....

[carmen617]

If I may steer this back to the original topic for a moment... carmen 617 mentioned about using the 20% income pass through deduction .

There is supposed to be a figure on Line 9 of Form 1040, and I checked my tax software, and yes, that was already figured in. I'm going to continue to research this, and who knows, I may even end up seeking out a tax prep service. I cannot imagine that I am going to have to pay this in, in lieu of the meager salary

https://www.nerdwallet.com/blog/taxes/pass-through-income-tax-deduction/

You just might. Tax software will accurately figure your taxes based on the data you input. Your problem is that your withholding was inadequate for your (even meager) income, thus your tax burden is coming in the form of a check you need to write by April 15th and send to the government. It might be that you need to up your quarterly payments, or that the withholding jiggering the government did with your wife's income to increase her take home pay has come back to bite you in the butt.

In general, the only way to reduce your tax burden is to reduce your taxable income. The tax law changes eliminated the value of itemized deductions for most Americans by increasing the standard deduction. So, for example, you can't find a few hundred dollars by adding up all the clothes you sent to Goodwill last year. But you have a small business, so you can deduct all legitimate business expenses. A tax expert might help you look deeper for additional expenses. You can also reduce your income significantly by depositing money into an IRA, up to 5500 each for you and your wife - that might seem impossible when you can't even pay the taxes owed, but it's actually an investment in your future as well as a way to reduce your taxes, so it's worth trying to scrounge up the money somehow. Those are probably the only places you are going to find some relief, unless you paid for your own health insurance and it wasn't deducted properly as self-employed health insurance.

I'm far from a tax expert, but I have always handled my own taxes. And, like a lot of self employed people, every year is a crap shoot. Small (a few thousand) differences in income can make a major difference in taxes owed.

 

[Sky-Knight]

Anyone that's self employed really needs to have their taxes done by a competent CPA, because then you not only have that advocate in the case you get an audit, but you also can contact them through out the year and make sure you're paying enough every quarter.

 

[katz]

You just might. Tax software will accurately figure your taxes based on the data you input. Your problem is that your withholding was inadequate for your (even meager) income, thus your tax burden is coming in the form of a check you need to write by April 15th and send to the government. It might be that you need to up your quarterly payments, or that the withholding jiggering the government did with your wife's income to increase her take home pay has come back to bite you in the butt.

In general, the only way to reduce your tax burden is to reduce your taxable income. The tax law changes eliminated the value of itemized deductions for most Americans by increasing the standard deduction. So, for example, you can't find a few hundred dollars by adding up all the clothes you sent to Goodwill last year. But you have a small business, so you can deduct all legitimate business expenses. A tax expert might help you look deeper for additional expenses. You can also reduce your income significantly by depositing money into an IRA, up to 5500 each for you and your wife - that might seem impossible when you can't even pay the taxes owed, but it's actually an investment in your future as well as a way to reduce your taxes, so it's worth trying to scrounge up the money somehow. Those are probably the only places you are going to find some relief, unless you paid for your own health insurance and it wasn't deducted properly as self-employed health insurance.

I'm far from a tax expert, but I have always handled my own taxes. And, like a lot of self employed people, every year is a crap shoot. Small (a few thousand) differences in income can make a major difference in taxes owed.

I guess that deal the govm't passed in 2017 has been the cause of this...(obviously, to me, anyway). In years past, when I would use the software, it would show a negative balance until i started to input the mileage deduction. At that point, things would turn around and reflect a positive balance. at this point going forward, I suppose the only way a small bus. might find enough deductions is to set aside a space for a home office and use all of that to their advantage.

Even then, I know you still figure heat/air/etc. on a percentage basis and on the sq. ft., but hopefully that would be enough to pull things in the other direction.

 

[fencepost]

I think before going the home office route I'd definitely spend time with a CPA. I've shied away from it in the past despite having a small area that's basically just business use because I was concerned about the impact of claiming it when I later sell the house - it's been years, but I believe I was told at one point that there'd be tax implications at sale time based on depreciation due to such claims, and the value of claiming my little 30-40 square feet of exclusively business use space just wasn't worth it.

If I had an outbuilding or garage that was exclusively business, that would likely be different.

 

[carmen617]

I think before going the home office route I'd definitely spend time with a CPA. I've shied away from it in the past despite having a small area that's basically just business use because I was concerned about the impact of claiming it when I later sell the house - it's been years, but I believe I was told at one point that there'd be tax implications at sale time based on depreciation due to such claims, and the value of claiming my little 30-40 square feet of exclusively business use space just wasn't worth it.

If I had an outbuilding or garage that was exclusively business, that would likely be different.

Actually, an outbuilding or a garage is much more difficult to deal with than an in-home office, since the IRS implemented the simplified home office deduction. For that, your office needs to be within the walls of your home. I never deducted my home office (about 400 square feet in my finished basement that i use exclusively for working on computers) until they offered this option in 2013. It basically means you can take a flat deduction of $5.00/square foot up to a maximum of 300 square feet, and leaves depreciation, and other expenses, out of it. Kind of like the difference between deducting actual automobile expenses and just taking the mileage rate.

 

[sapphirescales]

60% unemployment sometime in the 2030s thanks to a mini-baby boom landing at the same time automation completes the 2nd Industrial revolution.

No argument there. Automation is going to fundamentally change the way we look at work. But I think we can all agree that the LAST thing we need to do is import a ton of unskilled useless eaters for "humanitarian" reasons when we've got a MASSIVE problem on our hands thanks to automation rendering a huge percentage of jobs obsolete. The democrat's answer to this is UBI, but that's destined to fail. The answer is to enforce a maximum 30 hour work week, then 20 hours, then 10 hours, etc. so that everyone can have a job and contribute to society during this transitional period.

It will be expensive and horribly inefficient, but telling half the population that they have to work a full 40 hour work week while telling the other half that they're useless and that they should just sit on their a$$es all day isn't going to make either group happy. People NEED to have some sort of PURPOSE in their lives. Sure there are some people that would be content doing nothing, but even if that's true for a short period of time, forcing someone to live like that is sure to increase the suicide rate.

Eventually we will get to the point where NO ONE has to worry about the basic fundamentals of life (food, water, shelter, medical care, etc.). Just like the quality of our lives has gone up over the centuries compared to peasants in medieval times, the quality of life of a poor person born in 2070 will be drastically better than someone born in 2019. Everyone will have a base level of living without having to work for it. This utopia is possible, but it will only come about naturally with the advancement of technology. It can't be forced by way of legislation or taxation. Politicians will try because people will be suffering during this transitional period, but it will only prolong the suffering.

One thing's for sure though...population will have to be reduced drastically in order for everyone on the planet to enjoy this base level of living. It would be hard to sustain this even with a population of 1 billion. Scarcity and technology...those will be the main topics of the future. Nobody will be worried about what bathroom they want to use once people really start suffering. I'm not looking forward to this transitional period. It doesn't have to be painful, but it's going to be. Greed will see to that. Like I said, reduce the hours, keep the pay the same. The money saved by the increased efficiency will more than offset the hiring of additional workers to do the same amount of work. Of course, corporations will resist this tooth and nail.

Basically, they need to be FORCED to pass on 90% or more of the gains from automation onto their "employees." Those "gains" won't be higher wages, but less hours for the same pay. The price of goods will have to remain relatively stable while the companies save sh*tloads of money thanks to automation, and then they need to put at least 90% of those extra profits towards hiring additional employees while cutting the hours for their existing employees and keeping their salaries the same. Eventually everyone will be going to work for 1 hour a day and it will just be stupid. Then the people that really NEED to work will work and get paid sh*tloads for their work, while everyone else enjoys the fruits of automation.

The people that are "unemployable" will have gradually transitioned over to this lifestyle of working less and less. They'll spend their time on things that they actually enjoy...creating new art, writing, spending time with family, teaching, etc. Eventually corporations will become obsolete as virtually everything is free to make. Then we need to come up with some way of limiting consumption so that people don't go crazy. People not unlike you and me will fix the machines, but there will literally be no other human "labor" necessary anymore. If the cost to make an iPhone is $0.00 - literally everything from extracting the raw materials to fabrication of the base materials, assembly of the product, and transportation to the end consumer are all done by machines, we can't justify having corporations anymore. People like us technicians will fix the machines because we LIKE that sort of work. Scientists and engineers will invent new technology because they ENJOY the challenge

 

[Sky-Knight]

We can easily sustain 4-5 billion people. And the tech keeps getting better and allowing for more, the trouble is the technology to cover those needs comes a generation or two after we need it. Which is why we need our population to be cut in half right now. #Thanosisright

And ultimately that's why we'll see WWIII soonish, because those people will die. And no one wants to be the dead one, so we're going to start by exterminating entire cities in poor countries. The process has already begun. It's horrible, unconscionable, and brutal, but it's still a quite real thing.

But that Utah outfit that can convert all plastics back into oil, huge deal and changes the game. That Canadian outfit that can make diesel fuel from the AIR, another game changer. We might just figure out how to feed the people we have today, and the world's population is stabilizing naturally... so we might... maybe get out of this without a huge world war. But to get there we need leaders that have brains, and instead we have fascists and socialists to choose from.

P.S. UBI is how you tax producers and leave the rest of us with freedom make decisions. So honestly, while I hear your concerns I don't share the hate, because I don't see anything else that's going to work... yet.

 

[Sky-Knight]

So to bring the thread back on topic, and to report on my own tax situation. I had my appointment this morning with my CPA.

He tells me that the people that have owed in his sphere are not the self employed, or business owners, but instead the employees. It turns out when the tax rates fell and the deductions were yanked, the typical HR response was to reduce withholding purely based on the tax rate. The end result was people bringing home more money every month, paying less in taxes, and when April rolled around they found they owed a bit, or a lot, depending on how large the error was.

For his part, he tried to warn everyone that asked, which it turned out included myself last year during our tax appointment. And because I followed his instructions all year, I should be able to expect a return that's normal for my reality. I don't actually aim for a return, I just want to see a slight recovery. I don't like giving the government an interest free loan, but it also makes me look better in an audit when I have years of a consistent return to fall back on.

For now no actual numbers though, I have to wait for him to finish crunching everything. But assuming it all comes out as planned, this is yet another reason why I pay him $400 / year to handle both of my businesses, and personal taxes. I'm an IT guy, not a tax guy after all.

 

[sapphirescales]

But assuming it all comes out as planned, this is yet another reason why I pay him $400 / year to handle both of my businesses, and personal taxes. I'm an IT guy, not a tax guy after all.

Damn, I wish my accountant charged $400. I pay close to $10,000/year to my tax guy.

 

[Sky-Knight]

Damn, I wish my accountant charged $400. I pay close to $10,000/year to my tax guy.

You aren't using him for just taxes then, you've retained him to be your accounting department.

Well either that or he's a financial advisor for a LOT more money than I manage.

 

[Vyper28]

Came in to this thread thinking "man, I know how you feel" then started to see the numbers...


Mannnn I owe 27k in taxes this year - . -