Tax Season 2012: Work No Longer Pays

[DisplacedCornellian]

Re: Tax Season 2012: Work No Longer Pays

So, I want to stab someone with a pencil...

I didn't get any Federal Income Tax Withheld from either of my two jobs... That means a $0 Federal refund right? Should I even calculate Loan Interest into all this then? I mean, it seems pointless... It's gonna be $0 any way I figure this, right?

If you didn't get any withheld then wouldn't you be the one writing the check? Unless of course it falls under a certain amount. I think you need to file regardless. Unless you want issues with the IRS for the rest of your life.

Check the filing reqs - look like the threshold for filing is $9500.

http://www.irs.gov/publications/p17/...link1000170392

If you didn't have anything withheld - you might end up having to pay in, so it could DEFINITELY be worth it to deduct loan interest where you can to minimize that amount.

Screw around with turbotax or any of the other bazillion free filing systems - they make it pretty easy.

[FreshFish]

Re: Tax Season 2012: Work No Longer Pays

So, I want to stab someone with a pencil...

I didn't get any Federal Income Tax Withheld from either of my two jobs... That means a $0 Federal refund right? Should I even calculate Loan Interest into all this then? I mean, it seems pointless... It's gonna be $0 any way I figure this, right?

Generally, if you are filing single, then there is no tax on the first $9,500 of income (between standard deduction and personal exemption). See IRS form 1040.

As far as student loan interest goes, it depends. If you are running a sole proprietorship and your loan interest was incurred directly related to your business (e.g. you operate a computer repair business and you had a loan to go to Tech School to study computer repair) then you probably can deduct your student loan interest directly on schedule C. Otherwise, it's not worth trying to itemize deductions unless the total exceeds $5,800 (the minimum deduction available to all single taxpayers).

Surprisingly, the 1040 EZ is not that complicated nor difficult to complete, if you fall into that category. I think there are powerful forces in our society that have a vested interest in having people feel more stupid than they actually are.

[Twitch Boy]

Re: Tax Season 2012: Work No Longer Pays

Filing single and 0, and I bought a home last year, so I'm expecting a nice-sized receipt for an interest-free loan to the government refund. Would like to put it toward a debt of some kind since I'm doing well enough without it, and I have the PFD coming later this year.

Leaning car because that's my biggest non-mortgage monthly payment, I got a brutal interest rate, and paying it off early would free up a ton of monthly income and leave me with a pretty valuable asset (Jeeps depreciate EXTREMELY slowly, especially in Alaska where any 4WD vehicle is worth its weight in gold.) Or I could also drop it into the principal on my mortgage to speed up my equity and allow me flexibility if I decide/am forced to move. Or I could dump it into TSP. Already pay the full balance on my CC - really only use it for big ticket/online purchases, gas, and emergencies. Student loans aren't that bad, and besides they're mostly deductible (would like to eventually be a good son and help my parents with theirs at some point, though.) Doing well otherwise, taking in more than I'm giving out.

Any suggestions?

[FlagDUDE08]

Re: Tax Season 2012: Work No Longer Pays

Filing single and 0, and I bought a home last year, so I'm expecting a nice-sized receipt for an interest-free loan to the government refund. Would like to put it toward a debt of some kind since I'm doing well enough without it, and I have the PFD coming later this year.

Leaning car because that's my biggest non-mortgage monthly payment, I got a brutal interest rate, and paying it off early would free up a ton of monthly income and leave me with a pretty valuable asset (Jeeps depreciate EXTREMELY slowly, especially in Alaska where any 4WD vehicle is worth its weight in gold.) Or I could also drop it into the principal on my mortgage to speed up my equity and allow me flexibility if I decide/am forced to move. Or I could dump it into TSP. Already pay the full balance on my CC - really only use it for big ticket/online purchases, gas, and emergencies. Student loans aren't that bad, and besides they're mostly deductible (would like to eventually be a good son and help my parents with theirs at some point, though.) Doing well otherwise, taking in more than I'm giving out.

Any suggestions?

Whichever one is the highest interest rate.

[FlagDUDE08]

Re: Tax Season 2012: Work No Longer Pays

So, I want to stab someone with a pencil...

I didn't get any Federal Income Tax Withheld from either of my two jobs... That means a $0 Federal refund right? Should I even calculate Loan Interest into all this then? I mean, it seems pointless... It's gonna be $0 any way I figure this, right?

Was Social Security and Medicare withheld? If not, that needs to be reported and paid.

[RaceBoarder]

Re: Tax Season 2012: Work No Longer Pays

Was Social Security and Medicare withheld? If not, that needs to be reported and paid.

Those were both taken out already...

IDK... My dad made a big deal about doing the 1040A over the 1040EZ because of student loan interest... After fumbling through the numbers, it just seems like a moot point.... Basically I am just wondering if I wasted time with the 1040A... That's why I asked the question...

[FlagDUDE08]

Re: Tax Season 2012: Work No Longer Pays

Those were both taken out already...

IDK... My dad made a big deal about doing the 1040A over the 1040EZ because of student loan interest... After fumbling through the numbers, it just seems like a moot point.... Basically I am just wondering if I wasted time with the 1040A... That's why I asked the question...

You didn't waste time with it. Honestly, you might as well get used to filling out the longer forms, and what everything means in association. Once I got out of college, I decided to do 1040 instead of 1040A because of Moving Expenses, but then found out the very next year that I was required to fill out 1040 because of stock selling. The experience helped. I could never do 1040EZ, anyway, because of capital gains.

[unofan]

Re: Tax Season 2012: Work No Longer Pays

So, I want to stab someone with a pencil...

I didn't get any Federal Income Tax Withheld from either of my two jobs... That means a $0 Federal refund right? Should I even calculate Loan Interest into all this then? I mean, it seems pointless... It's gonna be $0 any way I figure this, right?

Just because you didn't get any withheld doesn't mean you won't owe anything...depends how much you made at each job.

[FlagDUDE08]

Re: Tax Season 2012: Work No Longer Pays

If you don't have your W-2's yet, complain to the company, and possibly report it, as they needed to be mailed by January 31st.

Stock brokers have until February 15th to compile their 1099's.

[Priceless]

Re: Tax Season 2012: Work No Longer Pays

I forgot that before this brain tumor I bought stock in AIG. Thanks to the reverse split they did I now have all of 3 shares in the company which resulted in a net gain of $6.27. I didn't include that whopping investment in my tax return. I won't end up in the Big House will I?

[FlagDUDE08]

Re: Tax Season 2012: Work No Longer Pays

I forgot that before this brain tumor I bought stock in AIG. Thanks to the reverse split they did I now have all of 3 shares in the company which resulted in a net gain of $6.27. I didn't include that whopping investment in my tax return. I won't end up in the Big House will I?

Since it's under $10, it's considered "De Minimis", and so you won't.

If only I could pick up chicks like that guy in the elevator during that H&R Block Tax Training Course commercial...

[dxmnkd316]

Re: Tax Season 2012: Work No Longer Pays

I don't think anyone can make a wrong choice when choosing between paying down debt or saving/investing. Personally I agree with Bob that paying down debt is a better choice over investing the money for the simple reason of cash flow (as Bob states). I also don't think that the return over the debt payments is enough to compensate for the risk that one must take on to get that return.

Even if you think that you can earn a return of 3% over your mortgage (after accounting for all the tax implications with regards to both the taxes on the investment and the mortgage interest) would that really be enough to justify the risk that is associated with the stock market? Would you invest in the stock market knowing that on average you would only get a 3% return (on average)?

I understand about leverage and the velocity of money and fully admit that the person who invest over paying off his mortgage will come out ahead of me provided that nothing goes two wrong, I've seen enough to recognize that expecting nothing to ever go wrong isn't a realistic way to view the world.

While I don't agree with everything that Dave Ramsey says, I do think that he has the order of steps (even if the specific details may not fit your specific situation) that most people should follow down:
1.) Save a small emergency fund
2.) Pay off all non-mortgage debt
3.) Save a large catastrophe fund (2 months of expenses, plus 2 month for every person in the household)
4.) Put 15% of income in tax advantage retirement funds
5.) Save ~10% for children's education and other intermediate goals
6.) Pay off any mortgage debt remaining.
7.) Save, invest, and build wealth.

I am sticking with a 9-month emergency fund. I really think 2 months is cutting yourself a bit short.

Regarding the order, I say:
1. Monthly obligations (mortgage, electricity, food, etc.) - If a person doesn't have a full emergency fund, he or she has no business getting into a long-term debt like a mortgage. Of course, this list doesn't apply to someone who is forced into dipping into an emergency fund.
2. Non-mortgage debt
3. Retirement, minimum of 15% off the bat, 20% is ideal.
4. Intermediate goals
5. Other non-retirement savings, investments, etc.

[Almington]

Re: Tax Season 2012: Work No Longer Pays

I am sticking with a 9-month emergency fund. I really think 2 months is cutting yourself a bit short.

That's 2 months of expenses PLUS two month for each person. As a single guy that would give me 4 months (assuming that I didn't change my spending habits if I lost my income source). But I'm single and I don't have anyone who I need to support or anything tying me to any specific area. If I had a house, I'd want a year of housing costs PLUS the 2 months + 2 months per person of non-housing expenses.

[dxmnkd316]

Re: Tax Season 2012: Work No Longer Pays

I'd want a year of housing costs PLUS the 2 months + 2 months per person of non-housing expenses.

Jeebus. I thought I was being conservative.

Although come to think of it, with the nine months emergency fund, I've included my mortgage plus average monthly spending, including entertainment (which seems slightly silly to include in an emergency fund). I'll have about 12 months of mortgage payments plus enough for food, utilities, gas for the car, and an extra $200-$300 for extras.

[Almington]

Re: Tax Season 2012: Work No Longer Pays

Jeebus. I thought I was being conservative.

Although come to think of it, with the nine months emergency fund, I've included my mortgage plus average monthly spending, including entertainment (which seems slightly silly to include in an emergency fund). I'll have about 12 months of mortgage payments plus enough for food, utilities, gas for the car, and an extra $200-$300 for extras.

The issue with an Emergency fund is what potential types of "emergencies" can you face.

As a young single who rents, with the exception of a major medical problem, I can't foresee any reasons why I need to have more than $10k in an emergency fund.

For someone who actually owns a home, you have many potential expenses to consider: major maintenance and repairs, the costs associated with selling or carrying two residences. You have more responsibilities, thus you need a larger emergency fund.