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Taxes

Discussion in 'New Roundtable' started by LaSalleAve, Aug 27, 2014.

  1. LaSalleAve

    LaSalleAve when in doubt, mumble

    Question for the tax gurus. Should I be getting taxed at a 20 percent rate biweekly? That seems awfully high. Is there a formula out there to minimize what taxes are taken from me to where I get nothing back when I file, but I only pay what I owe.

    Basically I'm tired of lending the government my money and not being allowed to charge interest.
     
  2. Bengal B

    Bengal B Founding Member

    You can always claim exempt status on your W2 and your employer won't take any federal taxes out but then you will owe the full amount at tax time. Nobody likes looking at their paycheck and seeing how much they would have gotten if it weren't for taxes but I would rather get a refund even though it amounts to an interest free loan to the government than have to pay it all at once. Besides, when you get your refund check the money always comes in handy
     
  3. red55

    red55 curmudgeon Staff Member

    Look at your last five 1040's. Fill out a new W4 and give it to your employer and ask to withhold less if you are getting a big tax reimbursement every year. If you are coming up short every April, fill it out for more withholding so you don't have to write a big check.

    It's nice to get a check from the IRS in the spring instead of writing one to them. But every withheld dollar that is more than what you owe, you are essentially loaning the government your money for nothing.
     
    tigermark and mctiger like this.
  4. mobius481

    mobius481 Registered Member

    It's funny, most guys I know withhold more money so they get a check at tax time. I never understood it because you could just save that money and at least get a return. When you're self employed with quarterly payments, this situation gets much tougher too although you can borrow money from the IRS if your income goes up substantially.
     
    HalloweenRun likes this.
  5. red55

    red55 curmudgeon Staff Member

    Ain't that the truth. Small business income fluctuates. Investment income changes from year to year. Other income is sporadic. Rental income is about the only one that is fairly consistent for me. The quarterlies are always an educated guess. I usually shoot a little low, but I prefer to pay a small penalty than pay excessive tax.
     
  6. red55

    red55 curmudgeon Staff Member

    This thread should probably be in the Roundtable, where more people will see it. Bound to be an accountant there with a magic formula.
     
  7. mobius481

    mobius481 Registered Member

    I've always been scared to get penalized and tend to overpay as I don't know my income til the end of the year. What kind of penalties do you get hit with?
     
  8. Bengal B

    Bengal B Founding Member


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  9. mobius481

    mobius481 Registered Member

    That's actually not as scary as I imagine an audit with the IRS is.
     
  10. red55

    red55 curmudgeon Staff Member

    I had to cough up $200 one year in late payment penalties because I underpaid quarterlies by about $16K in a year when I thinned trees and had unexpected capital gains from a major portfolio rebalancing. I can live with penalties like that.

    The ones I hate are the ones like the $375 underpayment one year for a consulting job so small that I forgot about it. The IRS computer caught it almost four years later and by the time I paid the delinquent taxes, the late penalty, and the interest for several years, I ended up writing a check for almost $800!
     

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