Anyone else get hosed on Taxes this year?

[benb]

I owed a huge amount relative to what has been mentioned.

Definitely didn't get hosed, just catching up on taxes owed on capital gains. Usually when I pay this bill I am laughing a little bit cause it feels like getting away with something.

We do this every year per professional advice, this year was an extremely rare one where there was a penalty. It was absolutely trivial compared to the interest earned keeping that money in even a money market for the rest of the year and then paying when taxes come due.

Put your stuff in things that generate capital gains. The whole system is totally rigged to make that advantageous.

[tellyho]

Two years ago, my wife had changed jobs / gotten a raise and withholdings did not get correctly calculated. It was a painful tax year, and I've fixed that problem. But as others have said, I got to use that money for the year.

[BdaGhisallo]

Watching from afar, it has always amazed me how complex and byzantine the US tax system is, and how utterly wasteful it is.

How much richer would Americans be if the resources spent on merely complying with tax filing requirements were free to be spent or invested elsewhere?

Living in a country where the tax system is overwhelmingly consumption based, with a payroll tax component that is collected by employers, I appreciate how simple life is here in comparison. No one I know has a personal accountant, or ever has to give a moment's thought to taxes, or has to factor tax policy into their daily consumption or investment decisions.

It is a testament to the vitality of the US that it can still be the economic engine of the world despite having such an anchor tied around its neck.

[Alistair]

Originally Posted by BdaGhisallo

Watching from afar, it has always amazed me how complex and byzantine the US tax system is, and how utterly wasteful it is.

How much richer would Americans be if the resources spent on merely complying with tax filing requirements were free to be spent or invested elsewhere?

Living in a country where the tax system is overwhelmingly consumption based, with a payroll tax component that is collected by employers, I appreciate how simple life is here in comparison. No one I know has a personal accountant, or ever has to give a moment's thought to taxes, or has to factor tax policy into their daily consumption or investment decisions.

It is a testament to the vitality of the US that it can still be the economic engine of the world despite having such an anchor tied around its neck.

The crazy thing is the tax code, for most people, isn't that complicated. But, the government refuses to "own" the process, instead forcing us to submit redundant documentation every year to prove we paid.

For the vast majority of tax-payers, the government has everything they need to know what we owe, or could easily obtain it. At which point they could just send a "does this number look correct?" mailer and that would be it (assuming it was correct).

The above should work for anybody taking the standard deduction and anybody deducting "normal" things (like mortgage interest).

But, TurboTax has an army of lobbyists. And a certain segment of the Republican party wants paying taxes to be painful because they're fundamentally opposed to taxes in general. So here we are, wasting billions of dollars a year on CPA services that wouldn't be necessary in any sane nation.

</political rant>

[C40_guy]

Originally Posted by Alistair

The crazy thing is the tax code, for most people, isn't that complicated. ...

...they could just send a "does this number look correct?" mailer and that would be it (assuming it was correct).

Updated form...

[JedB]

My federal refund paid for my state tax obligation that wasn't covered by withholding.

The 2x taxes that irritate me are city and county tax, but *only* if you make over $ABC amount.

I've worked hard to be in the "over $ABC" amount, but that doesn't mean the tax is actually fair.

If it's a tax to pay for public infrastructure (in this case, schools and I don't have kids) then IMO, everybody should be subject to the tax, even if on a sliding scale.

<insert grandpa simpson yelling at clouds>

[prototoast]

With the caveat that I am an economist who works in the area of tax policy, so the complexity is probably good job security for me, a few points.

-Our federalist system (each state has their own tax rules) is probably the biggest source of complexity for the typical taxpayer who only has wage income and small amounts of capital income. The federal taxes are usually pretty simple, but if you travel, work remotely, and/or move, state taxes get messy really quickly. Not much can be done at the federal level without fundamentally changing how our country is structured.

-In recent years, congressional budget rules has pushed more and more federal policy through the tax system. This is not ideal, but when advocates say "eliminate the filibuster" and simplified tax code isn't the first thing that comes to mind.

-There is often broad consensus that the tax code should be simplified, but not broad consensus about which benefits should get cut. This is analogous to conversations around bottom bracket standards. It's easy to get people to say there are too many bottom bracket standards, it's hard for everyone to agree on which ones to keep.

-The IRS introduced a system to allow people to file their taxes directly online this year. It's still a pilot, and can't cover every tax situation, but it's more than they've done in the past, and is at least an attempt to make filing taxes easier, although it doesn't actually make the tax code any simpler.

-Small business taxes are genuinely complex, and a huge source of fraud, but there are no easy solutions short of "don't allow businesses to deduct expenses."

[unterhausen]

Originally Posted by bigbill

I had an IRA with USAA that was meh. Then they turned their IRAs over to Schwab and it's been a great experience.

That's interesting, they turned most of their mutual funds over to some weird company with a scammy sounding name which I forget right now. But nobody ever heard of it before. We didn't have our IRA's at USAA, like you say their funds were mostly meh. The new company's management is actually okay so far, it's just that they gave us a taxable event at a bad time and I really wonder if it was fully necessary for them to do that. Or if it was just a case of "not invented here."

[Mr.Appa]

Originally Posted by prototoast

"There is often broad consensus that the tax code should be simplified, but not broad consensus about which benefits should get cut. This is analogous to conversations around bottom bracket standards. It's easy to get people to say there are too many bottom bracket standards, it's hard for everyone to agree on which ones to keep."

Truly a fantastic analogy, thank you for explaining it this way, ha!

[tomato coupe]

Originally Posted by prototoast

There is often broad consensus that the tax code should be simplified, but not broad consensus about which benefits should get cut. This is analogous to conversations around bottom bracket standards. It's easy to get people to say there are too many bottom bracket standards, it's hard for everyone to agree on which ones to keep.

Tax brackets. Bottom brackets. I see a theme here …

[wc1934]

Originally Posted by Alistair

The crazy thing is the tax code, for most people, isn't that complicated. But, the government refuses to "own" the process, instead forcing us to submit redundant documentation every year to prove we paid.

For the vast majority of tax-payers, the government has everything they need to know what we owe, or could easily obtain it. At which point they could just send a "does this number look correct?" mailer and that would be it (assuming it was correct).

The above should work for anybody taking the standard deduction and anybody deducting "normal" things (like mortgage interest).

But, TurboTax has an army of lobbyists. And a certain segment of the Republican party wants paying taxes to be painful because they're fundamentally opposed to taxes in general. So here we are, wasting billions of dollars a year on CPA services that wouldn't be necessary in any sane nation.

</political rant>

yup - cost me $210 for the accountant to do my taxes - Probably pretty straightforward for her - she has been doing mine for years - nothing has changed financially for me - senior citizen with a pension. She probably just pulls up old return and inserts this years numbers.

[saab2000]

Someone mentioned TurboTax using lobbyists. I’m sure it’s a big company but I’d like to know if there is a political bent here, without getting partisan or political. I know that’s tough for some. Please stay civil.

I’ve been a TurboTax client/user for many many years and am satisfied with it. My situation is pretty simple. I own my house, with a mortgage. I earn a paycheck with a W2. I have a 401k and an HSA and a few other tax advantaged things through my employer but I assume they are reported when reporting “Box XX” or “Box YY” and the software knows what to.

I have no dependents and a pretty decent income so I’m obviously in a higher bracket (not bottom bracket with ceramic bearings) and that’s the first world problem I referenced earlier. I’m grateful for what I have been able to live.

Is there an issue with TurboTax? I’m sure when I retire or start drawing SS or drawing down my IRAs or 401ks it will get more complex. For now it’s simple. Is TT not a good entity? Curious to know what others think.

No BS please. Keep as factual and simple as we can with this delicate subject.

[buddybikes]

Originally Posted by saab2000

Someone mentioned TurboTax using lobbyists. I’m sure it’s a big company but I’d like to know if there is a political bent here, without getting partisan or political. I know that’s tough for some. Please stay civil.

I’ve been a TurboTax client/user for many many years and am satisfied with it. My situation is pretty simple. I own my house, with a mortgage. I earn a paycheck with a W2. I have a 401k and an HSA and a few other tax advantaged things through my employer but I assume they are reported when reporting “Box XX” or “Box YY” and the software knows what to.

I have no dependents and a pretty decent income so I’m obviously in a higher bracket (not bottom bracket with ceramic bearings) and that’s the first world problem I referenced earlier. I’m grateful for what I have been able to live.

Is there an issue with TurboTax? I’m sure when I retire or start drawing SS or drawing down my IRAs or 401ks it will get more complex. For now it’s simple. Is TT not a good entity? Curious to know what others think.

No BS please. Keep as factual and simple as we can with this delicate subject.

Wife did manual entry then turbo put something in schedule D, had a dickens taking the entry out, there was no "delete". Then you pay for state with fed, but bingo - they nail you for submitting state online.

[saab2000]

Originally Posted by buddybikes

Wife did manual entry then turbo put something in schedule D, had a dickens taking the entry out, there was no "delete". Then you pay for state with fed, but bingo - they nail you for submitting state online.

They definitely try to steer their clients into more expensive options. I do both through them but am careful about the options. You need to opt out of certain expensive and mostly unneeded options. I will admit this. Just read slowly and know what you’re clicking, as with everything online…..

[prototoast]

Originally Posted by saab2000

Someone mentioned TurboTax using lobbyists. I’m sure it’s a big company but I’d like to know if there is a political bent here, without getting partisan or political. I know that’s tough for some. Please stay civil.

I’ve been a TurboTax client/user for many many years and am satisfied with it. My situation is pretty simple. I own my house, with a mortgage. I earn a paycheck with a W2. I have a 401k and an HSA and a few other tax advantaged things through my employer but I assume they are reported when reporting “Box XX” or “Box YY” and the software knows what to.

I have no dependents and a pretty decent income so I’m obviously in a higher bracket (not bottom bracket with ceramic bearings) and that’s the first world problem I referenced earlier. I’m grateful for what I have been able to live.

Is there an issue with TurboTax? I’m sure when I retire or start drawing SS or drawing down my IRAs or 401ks it will get more complex. For now it’s simple. Is TT not a good entity? Curious to know what others think.

No BS please. Keep as factual and simple as we can with this delicate subject.

TurboTax is, generally speaking, a fine product. The criticisms of them have to do with their business practices.

The short version of it is that Intuit has lobbied to stop IRS from making it easier for people to not use TurboTax, and often uses deceptive practices (e.g., advertises "free" but then adds a charge after people have gone through the process, or directs people who should have been eligible for free filing to sign up for paid products).

None of this means that the actual software is bad, or that you should be unhappy with their product.

Propublica has written a lot on them, and I recommend starting here: https://www.propublica.org/article/i...taxes-for-free