Tax whine

[an]

flu, just be glad you’re not in the bay. You’d really be consider wealthy and be paying a lot more. On the flip side, you have small biz owner who can deduct their 911 Turbo S as business expense. For awhile, I was trying really hard to move up the corp ladder, but now, I’ve seen the light. I want a safe W2 place with great benefits and low(er) wage that have flexible schedule, which allow me to do stuff on the side and get 1099. Last year, I did that and my combined state + federal was ~9%. This year, I didn’t do any 1099 stuff and I’m paying ~17% combined all the while, getting paid less.

[Coronita]

[quote=AN] Last year, I did that and my combined state + federal was ~9%. This year, I didn’t do any 1099 stuff and I’m paying ~17% combined all the while, getting paid less.[/quote]

You really know how to pour salt down that wound of mine…. Why not skip salt water, and just get out the rubbing alcohol and dump that in while you’re at it, and then get out a lighter while you’re at it 🙂

[an]

[quote=flu][quote=AN] Last year, I did that and my combined state + federal was ~9%. This year, I didn’t do any 1099 stuff and I’m paying ~17% combined all the while, getting paid less.[/quote]

You really know how to pour salt down that wound of mine…. Why not skip salt water, and just get out the rubbing alcohol and dump that in while you’re at it, and then get out a lighter while you’re at it :)[/quote]Well, at least you’re getting paid more than I. This is another reason why I decide not to move to the bay. I would probably be in your situation if I’m in the bay.

[all]

[quote=flu]Don’t even get me started……

Tax time is a constant reminder of how stupid I am for at least being partly dependent on being a W2 salary slave…[/quote]

We know your kid can write. Maybe you can hire her to write the documentation for you? Maybe do some QA as well. She can then pay for her own school and deduct that from her income. Something like that.

My daughter does some graphic design for my wife’s apps. Does that make her afterschool art program deductible?

[Coronita]

[quote=all][quote=flu]Don’t even get me started……

Tax time is a constant reminder of how stupid I am for at least being partly dependent on being a W2 salary slave…[/quote]

We know your kid can write. Maybe you can hire her to write the documentation for you? Maybe do some QA as well. She can then pay for her own school and deduct that from her income. Something like that.

My daughter does some graphic design for my wife’s apps. Does that make her afterschool art program deductible?[/quote]

You know as much as I would like to screw around the gray(grey) area for tax deductions, I really don’t want to get a call from the IRS… Especially if my kid or I ever plan of running for some vacant public office position… like one that hopefully Ted Lieu will lose….Then, I can get paid well to lie, pretend, and be a hypocrite for a living… Just kidding… Ok, not really.

[joec]

Downside with being self employed is that it’s not easy I feel…Being self employed now and being one of those AMT stock option people before, any job is so much less stress than working for yourself. Healthcare WAS a total bitch if anyone will even bother covering you.

Also, people tend to see only the successful business people and obviously, those people are doing well compared to the 7 others who failed…

Best advice I’d give anyone is have 1 spouse pay the piper for a stable, good benefit job. The other, start a business and be self employed and use all the tax benefits the tax code offers you. We considered leasing a car as well for the tax benefits (since we use 1 for the business), but am too broke to afford that. You don’t need more tax deductions when you income is already 0.

Also, to replace say a 100k salary, think of how many apps, consulting hours a person would have to do…It’s usually immense and someone would probably make more money working at In N Out, seriously…

Being a doctor sounds great, until you get sued (I know a doctor who was sued), but your income is still very high as a doctor and you’re probably paying a > 50% marginal rate also.

That said, the only way to really reach extreme or higher levels of wealth is all about starting a company…

Even athletes or entertainers/actors hold nothing against entrepreneurs who make it big.

[cvmom]

My sibling living in rural US has bought 20-ish super-cheap rental properties. Therefore, with depreciation, has approximately zero taxable income. Lives in 4000+ sq ft mansion with mountain views. Drives nice car, etc. Only one parent working. While their kids qualify for free lunch, scholarships, etc.

I on the other hand live in SD in two-income household. Work like crazy in order to live in our 1300 sq ft. Kids will not qualify for Questbridge (scholarship program for Ivies)…but at least we can sleep at night.

Paying our fair share of taxes feels like the right thing to do. And after living in Europe, having less than 30% effective federal+state tax rate feels downright luxurious. There we paid nearly 50% (of course health care was included.)

[UCGal]

[quote=no_such_reality][quote=flu]How the heck are you folks getting a 12% tax rate on fed. Mine is close to 19% and that’s with itemized deductions.

I must be doing my taxes wrong[/quote]

No, your taxes are the taxes of a person with high income.

UCGal is working the plan to have more life without realizing income. It’s the financial independence plan, you greatly simplify your life if you figure out how to happily live on less income.[/quote]
Exactly. Working part time gives me less $, but more time with the kids and for a life outside of work.

[CA renter]

[quote=UCGal]Turbo tax says my tax rate (fed income) was less than 12%. That’s not terrible. I don’t like paying taxes – but I do like freeways, education, a safety net for those less fortunate, etc.

[/quote]

[quote=scaredyclassic]my dad was always happy to pay taxes. he said it meant he was making money.[/quote]

Love these two posts!

And for those who are thinking that we must be paying low tax rates, our effective federal tax rate is usually around 16-18%, and our property taxes are over $7,000/year.

[scaredyclassic]

[quote=CA renter][quote=UCGal]Turbo tax says my tax rate (fed income) was less than 12%. That’s not terrible. I don’t like paying taxes – but I do like freeways, education, a safety net for those less fortunate, etc.

[/quote]

[quote=scaredyclassic]my dad was always happy to pay taxes. he said it meant he was making money.[/quote]

Love these two posts!

And for those who are thinking that we must be paying low tax rates, our effective federal tax rate is usually around 16-18%, and our property taxes are over $7,000/year.[/quote]

i remember them doing their taxes together, then running it by larry, their “tax guy”, who was actually an “of counsel” lawyer in a mega ny law firm.

the return was ordinarily way too tiny for his attention, but he was a childhood pal of my dad…my mom was/is so punctilious and honest i’m sure it must have been extremely time consuming for my dad. the odds of her cheating are zero. the odds of her estimating, guessing, or attempting to skew anything in their favor without absolute certainty on fact or law that she is right…also zero…

my dad was a salesman with im sure a fairly complicated return….many hours spent going over tax records, adding and readding…but i never remember him complaining one bit…

[EconProf]

In discussing one’s “tax rate”, it is important to first define terms.
If you mean your income tax paid in one year relative to income for that year, that is called your average tax rate. I believe that is what most of the posters are referring to here.
But if you mean your tax bracket–the tax you paid on your last dollar earned–that is the marginal tax rate. It is far more important in decision-making…whether to take on extra income or not, whether to invest in tax-free municipal bonds or not, etc.
In a progressive tax system like ours, where your rate goes up as income increases, marginal rates will always exceed average rates.

[UCGal]

[quote=EconProf]In discussing one’s “tax rate”, it is important to first define terms.
If you mean your income tax paid in one year relative to income for that year, that is called your average tax rate. I believe that is what most of the posters are referring to here.
But if you mean your tax bracket–the tax you paid on your last dollar earned–that is the marginal tax rate. It is far more important in decision-making…whether to take on extra income or not, whether to invest in tax-free municipal bonds or not, etc.
In a progressive tax system like ours, where your rate goes up as income increases, marginal rates will always exceed average rates.[/quote]

Yes – I’ve heard the term you used, average tax rate, also referred to as “effective” tax rate. My marginal tax rate is higher (25%). I will be hyper aware of where I fall in the marginal rate when I early retire in a few years – since we’ll be converting IRA to RothIRA up to the top of our marginal tax rate (Hopefully this will be in the 15% marginal rate bucket).

I fully acknowledge my overall tax rate is quite a bit higher – sales tax, property tax, state tax, gas tax, SS tax, medicare tax, etc.

[joec]

[quote=cvmom]My sibling living in rural US has bought 20-ish super-cheap rental properties. Therefore, with depreciation, has approximately zero taxable income. Lives in 4000+ sq ft mansion with mountain views. Drives nice car, etc. Only one parent working. While their kids qualify for free lunch, scholarships, etc.

I on the other hand live in SD in two-income household. Work like crazy in order to live in our 1300 sq ft. Kids will not qualify for Questbridge (scholarship program for Ivies)…but at least we can sleep at night.

Paying our fair share of taxes feels like the right thing to do. And after living in Europe, having less than 30% effective federal+state tax rate feels downright luxurious. There we paid nearly 50% (of course health care was included.)[/quote]

This is probably because your sibling does real estate / property management as his business so all income gets deducted with his expenses before he gets taxed…Again, the tax code is against w-2 wage earners. This is why many people don’t get rich worker and people start to realize this as they get higher up on the income scale to notice some 10-20% raise didn’t seem to do much in take home pay…

Not to mention benefits such as setting up a private defined benefit plan (pension) allowing your sibling to shelter literally hundreds of thousands of dollars a year in retirement benefits as well. Even without that, a self employed person can do 51k now it looks like:
http://www.irs.gov/Retirement-Plans/Retirement-Plans-FAQs-regarding-SEPs-Contributions

Think about someone who is asset rich and say two spouses can put aside 102k in retirement income a year so if they just “paid” themselves a salary of 51k a year, their taxable income is now 0…Unfortunately, there’s still FICA, but that’s still lower if they can manage to afford that.

Overall, just more options to minimize your tax each year.

UCGal, definitely keep your tax rate at 15% for any conversions since 25% is such a big jump (and add in near 10% state as well)…

I’m a big advocate of actually deferring any taxable income to future years. Of course, this is biased since I took time off work (0 income, got laid off, etc…) so had years where income is low to do roth ira conversions, etc…

[FlyerInHi]

[quote=joec]That said, the only way to really reach extreme or higher levels of wealth is all about starting a company…

Even athletes or entertainers/actors hold nothing against entrepreneurs who make it big.[/quote]

Statistically very unlikely to make it big in business. As you mentioned before, for every success, there are plenty more failures.

A business doing $5 to $10 million in annual revenue (not net income) is pretty good. Actors and top athletes make that much in a year. In order to hang with celebrities, business owners would need annual revenues of more than $100 million.

I read an academic study somewhere indicating compensation of celebrities on par with CEOs of large corporations.

[EconProf]

UCGal, you bring up another subject, one’s total taxes, of all types, relative to one’s income. To add up all taxes paid in a year in order to compare to that year’s income is kind of scary. It includes a lot of hidden taxes we often ignore and shows the full burden of government. If you do this exercise, include sales taxes paid (an estimate), property taxes (tenants need to estimate their share of the landlord’s taxes, since it is reflected in rent), corporate income taxes (reflected in prices paid, so incidence is largely on consumers), those pesky little items on your phone, el, and water bills, etc.

[Author]

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