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Tax Day Rambling

by retirebyforty on April 17, 2012 · 39 comments

in expenditure, fun stuffs

H&R Block At Home Online Deluxe is affordable and easy to use.

1040 tax form

The dreaded 1040 form

Whew! I e-filed our taxes on Monday night and got the acceptance confirmation on Tuesday. That was close. Our taxes were very complicated this year due to the various passive income sources we had in 2011. We ended up sending the IRS a big $6,000 check! I was expecting to owe some money so we saved up a tax payment fund in our checking account so it wasn’t a huge hit to our finance. I thought we would owe less because we had baby RB40 in 2011, but it turned out we couldn’t take advantage of the child credit tax since we made too much money. That bites.

Rental properties – We had a lot of repair and maintenance expenses in 2011. That along with depreciation means we had a loss and didn’t have to pay any tax here.

Online income – I made some money on the side last year and this income is taxed at a high rate on top of my earned income. This is part of why we owe so much this year.

Dividend and stock sales – I sold quite a few stocks in 2011 and had some gains that caused a tax liability. I channeled most of that money into dividend stocks and hopefully won’t have much turnover in the future. Beefing up the dividend portfolio also caused more tax liability…

2012 tax – I’ll probably have to send in some quarterly payment this year to avoid owing the IRS so much next year.

This year we chose to e-file because it is much easier than going to the post office and we don’t have to mail the tax forms (Ahem:  Mrs. RB40 had to go to the post office anyway to send off that check). Those tax forms contain so much information and if they got lost, we could have a bad case of identity theft on our hands.

It’s funny how much the social security number’s (SSN) importance has changed since when we were kids.  Mrs. RB40’s dad used to engrave her SSN on all her “more expensive” toys, like her bike and boombox, when she was young.  I guess if the boombox was stolen and by chance the police recovered it, then they can track down Mrs. RB40. Mrs. RB40’s dad got that habit from his dad, who engraved the family’s silver trays with an SSN…rendering everything worthless.

Today it’s the opposite. We would rather have any of our possessions stolen rather than the SSN. A thief can apply for a new credit card under your name and totally mess up your credit.  We have not had the experience of having our identity stolen, nor would we want to.  Mrs. RB40 is careful about shredding extraneous address labels and credit card offers that inhabit our mailbox.

Anyway, I am so glad we finished out taxes. It was a huge load off my shoulders. I vow to keep better records this year and plan to owe the IRS much less next April. How was your taxes? Did you filed at the last minute or did you get it done a while ago like a regular sane person would?

photo credit: flickr by 401K

{ 38 comments… read them below or add one }

Wayne @ Young Family Finance April 18, 2012 at 3:12 am

That’s some tax payment. I generally try to owe a little every year. I don’t like giving the government an interest-free loan. I’ve found the extra monthly income is much more helpful than the big check at the end of the year.

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retirebyforty April 18, 2012 at 10:19 am

We try to owe a little as well, but it didn’t work out this year. We’ll plan better in 2012.

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Thad P @ thadthoughts.com April 18, 2012 at 4:38 am

I’m with Wayne. I generally prefer not to give the government an interest free loan. Got my taxes done last week and a check in the mail to Uncle Sam. Thankfully not as high as yours and not as high as last year!

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retirebyforty April 18, 2012 at 10:20 am

Great job! I always put off sending the check until the last minute. :)

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20's Finances April 18, 2012 at 5:01 am

I completed mine with lots of time to spare, but waited until the end of March to file my taxes. I highly recommend it. I’m also keeping very detailed reports and keeping track of expenses for the income that I make online, separated by the tax categories. That means, at the end of the year, I add up the totals from the months for each category and I am done in a matter of minutes.

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retirebyforty April 18, 2012 at 10:21 am

I usually do that, but this year I had a bunch of complicated transactions. Rentals and stock options are difficult to deal with.
I’ll need to revamp my online spreadsheet with better categories.

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Alexa April 18, 2012 at 5:05 am

We had to send in a little more then you because we rolled our 401Ks from our old company into Roth IRAs. I dont ever want to do that again since we owed SO much!

(and thanks for your comment about the baby not helping you out on taxes :( I have a feeling thats the same boat we’ll be in when that time comes around)

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retirebyforty April 18, 2012 at 10:22 am

Whoa, that stinks! If you are in a high tax bracket, why did you roll the 401k into Roth IRAs?
Wouldn’t you rather put off the tax until you retire and make less money?

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Steve April 27, 2012 at 12:51 pm

Converting a tax deferred account into a Roth IRA is a way to “contribute” more to retirement accounts. Assuming of course that you pay the taxes from outside funds. Is this a good idea? It depends.

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MoneyCone April 18, 2012 at 6:57 am

It was a little complicated, but nothing TT couldn’t handle (thankfully!).

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retirebyforty April 18, 2012 at 10:23 am

TT was a pain. I had to hand edit some forms. It kept trying to amortize some of my rentals items over 30 years when I only have 10 years loan. Hopefully, I didn’t make a mistake.

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Jim April 18, 2012 at 11:48 am

What would TT need to amortize for a loan? Shouldn’t you just be entering the amount of interest you paid off a 1098?

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retirebyforty April 18, 2012 at 1:57 pm

points and a few other refinance related stuff for the rental.

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Aloysa April 18, 2012 at 8:13 am

We got a nice refund. But we lived on our paychecks solely and I made sure that we are paying enough in taxes not to owe anything. Your payment is REALLY painful. Sorry my friend!

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retirebyforty April 18, 2012 at 10:24 am

Increase your withholding if you have a refund. :)
We already saved up for the tax payment so it wasn’t that bad. It could have been a lot worse…

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Kurt @ Money Counselor April 18, 2012 at 8:58 am

We are working with a ‘professional,’ our first time with this individual. She didn’t get our return done in time, so we had no choice but to file for an extension. Then I sent in the money she suggested without thinking about it too much and a few hours later learned she’d neglected to consider the quarterly payments we made. So we’ve paid way too much, which we’ll get back of course, but still… ugh.

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retirebyforty April 18, 2012 at 10:25 am

Ugh… That sucks. Sorry to hear that. I thought things would go smoothly with a professional. I was just thinking we should hire someone for 2012. Thanks for sharing.

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Jeff @ Sustainable Life Blog April 18, 2012 at 9:35 am

That stinks joe, I owed quite a bit this year as well. I see where your editor had to chime in and clarify the situation about the check.

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retirebyforty April 18, 2012 at 10:26 am

I didn’t have to go to the post office so I forgot. :)
Hope you saved up for the tax payment and it don’t impact your finance too much.

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Steve April 27, 2012 at 12:53 pm

Why did you mail a paper check? I owed a small amount (time it perfectly this year) but I paid it by direct debit. That way I neither had to mail a paper check, nor did I have to wait until April to file my taxes (TT lets you schedule the debit in advance).

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SavvyFinancialLatina April 18, 2012 at 9:56 am

I filed taxes for the first time in my life. I used turbotax.

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retirebyforty April 18, 2012 at 10:26 am

Good job! ;)

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Frugal Portland April 18, 2012 at 9:56 am

wait, how do you send quarterly payments? will you have to file quarterly?

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retirebyforty April 18, 2012 at 10:27 am

TT estimated these quarterly payments and you can print out the payment coupons. You don’t have to file tax, just send in a check every month. That’s what self employed people have to do.

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krantcents April 18, 2012 at 12:45 pm

My CPA filed the beginning of April and I received my California state income tax refund yesterday. Unfortunately I had to pay taxes to the IRS. NOt as much as you, but I hate paying taxes.

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retirebyforty April 18, 2012 at 9:46 pm

I’ve been writing a check to the IRS in April for years and I’m used to it. Pay now or later, it’s the same amount right?

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ShortRoadTo April 18, 2012 at 2:25 pm

It’s good to get your income tax payments down to a science, that way you aren’t giving Uncle Sam an interest free loan. But, if you are foolish like I was this past year and underpaid, you get hit with an underpayment penalty.

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retirebyforty April 18, 2012 at 9:47 pm

I haven’t had to pay a penalty yet. If your based your withholding on last year’s income, you shouldn’t have to pay penalty even if you made more money right?

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Bichon Frise April 19, 2012 at 11:29 am

You either need to have 90% of the the current tax year’s liability withheld or 100% of the prior year’s tax liability withheld. Pick your poison!

I dislike our quarterly payments very much.

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Steve April 27, 2012 at 12:56 pm

… Or your current tax year’s liability minus $1000.

If you are a high earner, you have to have withheld up to 106% of the previous tax year’s liability.

Once I owed $1021 (and didn’t satisfy the other conditions). If you owe a penalty, it’s calculated on the entire amount (if I understand correctly). However, there was a checkbox for “have the IRS calculate the penalty.” I checked that and never heard about it again.

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Jai Catalano April 18, 2012 at 4:25 pm

Wow you brought it down to the wire. Brave soul you are… AND you did it.

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retirebyforty April 18, 2012 at 9:49 pm

I was mostly done 2 weeks ago, but kept making a little changes here and there. My stock option sales were very confusing to file. :)

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AverageJoe April 19, 2012 at 8:18 am

I stood in that line at the post office because I realized I’d used my last stamp the day before! …not fun…but on the positive side, my taxes are filed and my check (though also big) was planned.

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retirebyforty April 20, 2012 at 10:40 am

You probably want to send it certified anyway right? Yeap, I am so glad the taxes are over with. Now we’ll have more fun on the weekends. Yay!

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Kellen April 19, 2012 at 8:28 am

You didn’t have to make Mrs. RB40 go all the way to the post office! You can just set up your account for electronic withdrawal, the same way you can set it up for direct deposit. There should be a way to pay your quarterly payments electronically too. (Check out the EFTPS program here: http://www.irs.gov/efile/article/0,,id=98005,00.html) Congrats on filing your own taxes!

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retirebyforty April 20, 2012 at 10:39 am

I don’t trust those new fangle electronic transfer! Just joking. :D I haven’t heard about that. I’ll see if I can set it up for next year.

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Broke Professionals April 19, 2012 at 4:18 pm

First of all, the engraving of the SSN is priceless… reminds me of my great-grandmother, who used to leave notes for potential robbers telling them where NOT to find her jewelry (it was in her safe, not her jewelry box).

Second, I never thought about having to mail a check if you owed – there isn’t an “e-payment” system that would have saved her the trip?

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retirebyforty April 20, 2012 at 10:41 am

Heh heh, yes that is crazy. :)
I didn’t see the e-payment option. You can pay with a credit card, but there is a 4% charge or something like that.

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