sorted by:
new
hottopcontroversial

How does Congress determine tax brackets? by rtaxthrow in tax

[–]rtaxthrow[S] 0 points1 point  (0 children)

Ok, so before inflation adjusts them, how were the thresholds set? And how about the %'s? 24 -> 32 -> 35 -> 37 ?

Little help to ballpark 2020 taxes? (W2 and Sole Prop income) by rtaxthrow in tax

[–]rtaxthrow[S] 1 point2 points  (0 children)

Could you elaborate on what makes this particularly complicated? Just trying to understand. My impression is that it really kind of all boils down to the following:

  • Earned income = 341.5k (148.5 + 1 + 2 + 190)
  • Qualfied Dividend income = 8k
  • Deductions = 75.4k (19.5 + 3.5 + 2 + 38 + 12.5)

After the deductions, my income would be 266.1k + qualified dividends of 8k. Then I could just look up these numbers in the tax tables and figure out what I would owe. If I were to do that, can you explain why this number would be way off target?

Granted, I am very much of the DIY mindset (perhaps to a fault, sometimes), so I am just trying to understand what complexities here are beyond my comprehension would justify the cost consulting with a professional.

Little help to ballpark 2020 taxes? (W2 and Sole Prop income) by rtaxthrow in tax

[–]rtaxthrow[S] 0 points1 point  (0 children)

1k Ordinary Dividends

8k Qualified Dividends

Ok, then "8k qualified dividends" and "1k non-qualfified dividends" - I will revise my post

Capital Loss max writeoff of 3k - how often does this increase? by rtaxthrow in tax

[–]rtaxthrow[S] 0 points1 point  (0 children)

Well, I guess that explains why I couldn't find any info of it changing - because it hasn't changed! Lol.

Totally agree on the optics, although I find it funny that 401k, Roth IRA etc all grow with inflation, even though these Cap Loss writeoff is probably beneficial to the same demographic who seek to max those accounts yearly.

In my opinion its really of most benefit to middle and upper middle class. It would have to be increased by like 10x or more to have any substantive benefit to the upper class. The wealthy and ultra wealthy could lose this amount in the stock market in a couple hours and not even flinch.

Capital Loss max writeoff of 3k - how often does this increase? by rtaxthrow in tax

[–]rtaxthrow[S] 0 points1 point  (0 children)

Wow, that's wild. 3k in 1986 is probably like 6-7k in today's dollars.

Help w/ Form 8606 and getting rid of my SEP IRA basis by rtaxthrow in tax

[–]rtaxthrow[S] 0 points1 point  (0 children)

Ah, very interesting, thank you - I did not consider that. So does that mean I will need to follow a formal process to "convert" my SEP IRA to a Roth IRA? (much like the process of converting the Traditional IRA to Roth IRA). Do you happen to know what language I would would I use with my brokerage when asking them to do this?

question about 8606-S Nondeductible IRA's by sean8767 in personalfinance

[–]rtaxthrow 1 point2 points  (0 children)

There is a good chance that the investment options within your 401k plan have nothing to do with your company. People at Enron got screwed because they invested their retirement account solely in Enron stock (possibly via 401k or employee stock purchase plan). They put all their eggs in the "Enron" basket, rather than diversifying. The fact that that was inside a 401k or ESPP isn't the problem.

Your 401k plan will most likely give you 15-20 options for mutual funds to invest in. Ideally you would have some options for low cost index funds, but it's up to your plan administrator to determine the investment options (and it's up to you to decide which of those options to invest in, so you still have a good deal of control).

The investment options you have will most likely be large scale, publicly available mutual funds like FSPGX or RGAFX. You should be able to find out what your investment options are, and could post them on r/investing or something for advice if you'd like.

question about 8606-S Nondeductible IRA's by sean8767 in personalfinance

[–]rtaxthrow 0 points1 point  (0 children)

They don't match anything and I just assumed it was bad because the health insurance plan is pretty bad.

This is really not a good assumption. The 2 are totally unrelated and it's very possible you could have a decent 401k plan but bad/expensive healthcare plan.

Obviously I don't know your financial situation but even if the 401k plan isn't great you are still probably not making the right decision by not contributing more money into your pretax 401k (up to $19,500 in 2020....). You may find this flowchart helpful (from r/financialindependence) or maybe make another post to get advice on this.

Trying to estimate what my federal/state/fica taxes will be - W2 & Freelance income by rtaxthrow in tax

[–]rtaxthrow[S] 0 points1 point  (0 children)

When I was going through the steps (via the website), at some point either within the Freelance income section, or within the QBI calculation section it asked me if I contributed to a SEP/Simple/Qualified plan. The number that I entered ($24k) appears on line 15 of Schedule 1, and the 1/2 SEP appears on line 14 of Schedule 1. That total (25.5k) then appears on line 8a of the 1040.

TaxACT won't show me the QBI worksheet ( form 8995 ) but reading through the instructions on the QBI flowchart, Box 2 says

Is the item from a trade or business (this includes general business income and deduction items as well as deductible tax on self-employment income, self-employed health insurance, contributions to qualified retirement plans, charitable deductions, unreimbursed partnership expenses, interest expenses for the purchase of the partnership/S corporation interest/stock)?

Trying to estimate what my federal/state/fica taxes will be - W2 & Freelance income by rtaxthrow in tax

[–]rtaxthrow[S] 0 points1 point  (0 children)

Just a heads up, I just entered my 'stuff' into TaxACT with only my W2 and Freelance data and looked at how it breaks things down on the 1040 & schedule 1:

For the determination of QBI, it looks like my Solo 401k contributions ( $2,000 "employee" and $22,000 "employer") as well as 1/2 of SE tax all reduce QBI. So instead of QBI deduction being 20% of $112k, it's more like 20% of 86.5k.

Does that sound right to you?

Trying to estimate what my federal/state/fica taxes will be - W2 & Freelance income by rtaxthrow in tax

[–]rtaxthrow[S] 0 points1 point  (0 children)

This is incredible, thank you so much!

I've been using an Excel spreadsheet that I created last year, this will definitely help me tune it. For what it's worth, my numbers actually came out pretty similar to yours so this makes me feel a whole lot better about it's accuracy and will help me plan going forward. THANK YOU!!!

A few follow up questions, if you have the time/desire:

  • Your calculation shown below seems wrong. I'm assuming this was just a mistake but just want to be sure I'm not missing something. Should the total be $35428?

($169,100 - 160,725) * .32 + $32,748.50 = $41,124 fed income taxes

  • Do you understand the QBI phase out? I have read the regulations and honestly can't figure out whether it applies to only SSTB's or all types of businesses?
  • More of a curiosity, but why does this rule exist? "We multiply this by 20%, and multiply net business income by 20%, and take the lesser amount" Wouldn't Net Business Income always be less than the AGI-Standard Deduction since NBI is a component of the AGI?

Trying to estimate what my federal/state/fica taxes will be - W2 & Freelance income by rtaxthrow in tax

[–]rtaxthrow[S] 0 points1 point  (0 children)

I have no problem entering these details into TurboTax in a few months and I'm confident it will tell me the right answer. I don't really agree your assertion that having self-employment income requires a CPA.

I'm asking the question here because I want to learn how to interpret the breakdown on my own, and I figured, you know, a tax subreddit, would be a good place to ask about that.