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Tue Feb 26, 2013, 11:06 AM

 

I just finished my Federal taxes for 2012 .....

.... using Turbotax. I know there is a lot of interest here regarding effective tax rates between us and the 1%, so I'll share mine here.

(edited to add I take the standard deduction.)

I'm not rich. I'm retired and live on a pension, social security and a small withdrawal from my IRA. I take the Standard Deduction (no fancy loophole deductions.) I also sold some stocks from my small brokerage account to get the funds to help my son with the down payment for his first house purchase last year, so I had a bit of long term capital gains tax, just like a rich guy. I also have some tax free interest income from a tax free municipal bond fund in my brokerage account. Not nearly enough to live on, but enough for a dinner out every couple of months.

The good news is that I get to contribute a total of $12,154 to our society in the form of Federal Income Tax for the year 2012.

And here are the effective tax rates:
Tax on Total Income: 11.7%
Tax on Adjusted Gross Income: 11.7% (I don't have any adjustments)
Tax on Taxable Income: 14.7%

I don't think that is too great a burden to pay for the benefits of living in a civilized society. You can do the math and see that I am doing OK in retirement so far. I like to think that is the result of a long and stable career in engineering, a stable family, good retirement planning, (mostly) wise investments, and being fortunate in having had no major medical or other emergencies. I hope this luck holds.

So I pay almost 15% of my retirement income in Federal income tax. I'm not complaining. But since I didn't have enough withheld from my pension (and 85% of my SS is taxable) I end up still owing the Feds almost $2300. (First time I have not gotten a refund in over 30 years.) I think I will wait until April 15 to send them a check.

What do you think of the rates compared to a 1%er? How do yours compare?



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Arrow 61 replies Author Time Post
Reply I just finished my Federal taxes for 2012 ..... (Original post)
oldhippie Feb 2013 OP
trof Feb 2013 #1
oldhippie Feb 2013 #3
trof Feb 2013 #46
oldhippie Feb 2013 #49
marybourg Feb 2013 #2
oldhippie Feb 2013 #5
marybourg Feb 2013 #9
oldhippie Feb 2013 #10
NMDemDist2 Feb 2013 #4
srican69 Feb 2013 #6
oldhippie Feb 2013 #7
srican69 Feb 2013 #8
hfojvt Feb 2013 #15
OldDem2012 Feb 2013 #11
oldhippie Feb 2013 #12
Gorp Feb 2013 #13
oldhippie Feb 2013 #14
Gorp Feb 2013 #17
HangOnKids Feb 2013 #19
oldhippie Feb 2013 #20
HangOnKids Feb 2013 #25
valerief Feb 2013 #27
Yavin4 Feb 2013 #16
hfojvt Feb 2013 #18
ellisonz Feb 2013 #21
oldhippie Feb 2013 #24
oldhippie Feb 2013 #22
dmallind Feb 2013 #26
hfojvt Feb 2013 #43
hfojvt Feb 2013 #39
oldhippie Feb 2013 #45
Drahthaardogs Feb 2013 #33
hfojvt Feb 2013 #47
Drahthaardogs Feb 2013 #51
hfojvt Feb 2013 #53
Drahthaardogs Feb 2013 #54
hfojvt Feb 2013 #55
Drahthaardogs Feb 2013 #58
hfojvt Feb 2013 #60
RILib Feb 2013 #57
ananda Feb 2013 #23
Little Star Feb 2013 #28
A Little Weird Feb 2013 #36
Little Star Feb 2013 #41
truedelphi Feb 2013 #52
Little Star Mar 2013 #61
oldhippie Feb 2013 #38
Little Star Feb 2013 #42
bigdarryl Feb 2013 #29
oldhippie Feb 2013 #40
peace13 Feb 2013 #30
oldhippie Feb 2013 #31
FreeJoe Feb 2013 #32
oldhippie Feb 2013 #35
FreeJoe Feb 2013 #34
oldhippie Feb 2013 #37
JaneyVee Feb 2013 #44
W_HAMILTON Feb 2013 #48
oldhippie Feb 2013 #50
FreeJoe Feb 2013 #56
oldhippie Feb 2013 #59

Response to oldhippie (Original post)

Tue Feb 26, 2013, 11:18 AM

1. Funny you should ask. Your pension must be better than mine.

Just finished my taxes and I paid exactly 10% of my taxable income (only $!7,000 after taking standard deduction and exemptions.)
I'm getting a $1200 refund on withholding from my pension and IRA withdrawal.

The good news is that I paid NO state income tax.
Happily, Alabama doesn't tax S/S or qualifed pensions.

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Response to trof (Reply #1)

Tue Feb 26, 2013, 11:35 AM

3. Yes, I am very happy with my pension ....

 

Forty years with the fed govt under the old CSRS finally paid off. There were times when I didn't think I was going to be able to stick it out, but I am glad now that I did.

I'm also very happy Texas has no state income tax, though our high property tax makes up for some of it.

The thing that threw me for a loop was the tax on the stocks I sold (Caterpillar and GE) to help my son with his house down payment. I had held those stocks for many years, and they had appreciated greatly. I was feeling pretty cocky about having made a good return on that investment, but even though I knew it was coming, even the preferred long term capital gains rate kinda took me by surprise. Thus the fact that I owe the Feds this year. But I can't really complain. (Maybe I should look into an offshore haven? )

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Response to oldhippie (Reply #3)

Tue Feb 26, 2013, 07:45 PM

46. PBGC took over my pension when TWA folded.

$3000/mo. pension now = $1500/mo. under PBGC rules.
Bummer.
Lost my free medical care till age 65 too.
Back then airline pilots had forced retirement (FAA reg) at 60.
Double bummer.
Just color me 'screwed'.

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Response to trof (Reply #46)

Tue Feb 26, 2013, 07:59 PM

49. Yup. Bummer is right ......

 

You would think that when you have an agreement with an employer that the terms would stick, but they don't.

I did my MBA programs back in the 80's when there was a lot of the corporate restructuring going on. We spent a lot of time in several different courses talking about the effects of restructuring and bankruptcies on pension plans. Probably the reason that defined benefit Plans went the way of the Dodo.

I have thanked my lucky stars that my pension is from the federal govt and not subject to the vagaries of corporate restructuring. But I also realize that Congress could completely change the terms of my pension at any time they choose.

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Response to oldhippie (Original post)

Tue Feb 26, 2013, 11:35 AM

2. Well your pension must be extremely generous or you've done something

very wrong We too have a small pension and S.S. and IRS withdrawals and sold stock to buy a house for OURSELVES (so a LOT of stock, with a high percentage of taxable profit) so just for this year, our adjusted gross income was over $132,000, and our tax bill was $8800, which I am pleased to be in a position to pay. So for your taxes to be nearly 50% higher than mine,
well you probably ARE rich, at least in my book.

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Response to marybourg (Reply #2)

Tue Feb 26, 2013, 11:48 AM

5. Yes, I will admit to being happy with my pension .....

 

.... and I sure hope TurboTax didn't do something very wrong in my tax calculations!

But I am curious about your final tax rate. For your tax to have been less than mine with your larger overall adjusted gross income, then there must have been some large deductions to get the taxable income down. I wonder if you had some large medical deductions or tax and interest deductions to do that? Did you get to take advantage of the first time homebuyers credit or some other good credit? I'm not trying to pry or criticize, I just like to understand things. I completely understand if you do not wish to share any more of your financial situation.

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Response to oldhippie (Reply #5)

Tue Feb 26, 2013, 12:09 PM

9. Standard deduction, no credits. No carryover cap losses.

Did you fill out the form for "Qualified Dividends and Capital Gains"?

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Response to marybourg (Reply #9)

Tue Feb 26, 2013, 12:21 PM

10. Yes, turbotax does that

 

automatically.

May I ask what was the tax rate on your taxable income? (Total tax (line 61)/taxable income (line 43))

There are so many different lines called "income" and "tax" that it is easy for me to get confused.

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Response to oldhippie (Original post)

Tue Feb 26, 2013, 11:39 AM

4. DINK (dual income, no kids)

no mortgage, no deductions at all in fact.

paid a net 12% IIRC

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Response to oldhippie (Original post)

Tue Feb 26, 2013, 11:48 AM

6. have you added your FICA and state taxes ... please do ...as the rich pay a very small portion

of their income in those taxes

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Response to srican69 (Reply #6)

Tue Feb 26, 2013, 11:53 AM

7. No state taxes here in Texas, and for FICA ....

 

.... I'm retired, had no W-2 income, and thus no FICA tax. I did have a couple days of consulting work, for which I had to pay the self-employment tax, which is kinda like FICA, but not exactly.

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Response to oldhippie (Reply #7)

Tue Feb 26, 2013, 12:04 PM

8. I work on a 1099 - so I pay 15% FICA straight off the bat and income taxes on top of that ...


The reason is that I have to pay both the employee and the employer portion of the taxes ... and I get the same benefit as paying half the amount ...

I really hate it

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Response to srican69 (Reply #8)

Tue Feb 26, 2013, 04:15 PM

15. you should be able to deduct half of that

on line 27 of the 1040.

Not that that gets you much back.

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Response to oldhippie (Original post)

Tue Feb 26, 2013, 12:44 PM

11. I used TaxACT for the first time since we can no longer afford to pay our CPA...

....and we still owe him the fees for the last two years, but that's just another benefit of being unemployed for four years.

Anyway, I was very pleased with TaxACT. I used copies of my past filings to make sure I covered all of the bases and followed the program's step-by-step process. I submitted our Federal Tax return on February 18th and we received our refund early today.

The refund wasn't nearly as much as we've received in past years, but we paid less Fed Taxes over the past year in return for more take-home pay. We also successfully went through a loan modification process that reduced our mortgage (including P & I) by 50%, but it also killed us on mortgage interest for the year.

TaxACT cost all of about $17.00 to include our state tax return....beats the heck out of the $390 the CPA charges. We owe state taxes, so I won't be submitting the state tax return until the last possible second.



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Response to OldDem2012 (Reply #11)

Tue Feb 26, 2013, 01:04 PM

12. I only used a CPA twice, and fired him ......

 

Back in the 80's (the decade of greed) I had a CPA do my taxes for two years. He was the accounting prof for the MBA program I was taking at the time. My tax situation was a little complicated back then, having just left active duty military, getting VA education benefits, doing some side businesses, etc., so I thought having a professional CPA do my taxes was a good idea.

Well, both years, as I double checked the returns he had prepared before sending them in, I found errors that if I had not caught them would have cost me over a thousand dollars. One year he didn't correctly apply the income averaging provision I told him I was eligible for, and another year he would have had me pay California state tax on income that was not taxable in CA, but on which I had paid the tax in Illinois. So I fired him. (After I got my grades!)

After that I resolved to arrange my financial affairs to greatly simplify my tax returns. I figured if my financial affairs were so complicated that I couldn't figure out how to do my own taxes (with MBAs in Mgmt and Finance, by the way) then my life was too complicated. I managed to get my tax situation down to where I could file the 1040EZ several years in the 90's.

Nowadays, I have been using TurboTax for the last dozen years or so. It is a great convenience, doing a lot of record keeping and taking care of using the right forms. My tax situation is more complex than I would like, due to retirement and investment income, but at least I still (I think) understand all that is going on inside the program. I sure am glad to have it for when it comes time to do all the worksheets for qualified dividends and such.

And you're right. Both TaxAct and TurboTax are cheaper than incompetent CPAs!

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Response to oldhippie (Original post)


Response to Gorp (Reply #13)

Tue Feb 26, 2013, 03:59 PM

14. Why would you say that?

 

Do you think I should owe more tax? Or less?

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Response to oldhippie (Reply #14)

Tue Feb 26, 2013, 04:17 PM

17. Because one way or another, the IRS is going to bend you over.

 

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Response to oldhippie (Reply #14)

Tue Feb 26, 2013, 04:43 PM

19. A Jury Didn't Think It was Cool

 

The poster will now have a time out.

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Response to HangOnKids (Reply #19)

Tue Feb 26, 2013, 04:56 PM

20. What? Why on earth was that post hidden?

 

I didn't see anything over the top or rude in it. I'd like to know why the alerter did so.

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Response to oldhippie (Reply #20)

Tue Feb 26, 2013, 05:33 PM

25. I Just Commented On The Hidden Thread

 

I don't have any additional information.

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Response to oldhippie (Reply #20)

Tue Feb 26, 2013, 05:40 PM

27. I know why. Alerter must be a Ron Obvious Award winner.

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Response to oldhippie (Original post)

Tue Feb 26, 2013, 04:16 PM

16. You're Paying Slightly More (Percentage-wise) than Mitt Romney

But he has a ton more wealth than you do. Therein lies the problem.

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Response to oldhippie (Original post)

Tue Feb 26, 2013, 04:35 PM

18. you make over $100,000 a year for not working

and you think you are not rich?

I made a mere $31,329.74 for working full time all year. Made $152.37 in interest and $67.70 in dividends. Made about $500 in capital gains, but it gets recorded as a $175 loss because of FIFO accounting.

Total tax was $1719.or 5.48% of my total income.
or 6.77% of my AGI
or 11% of my taxable income

Not including the $1,843.82 that I paid in FICA taxes (which is also taxable income)
or the $1,305.46 taken for my retirement.

You are thankful you live in a state with no income taxes.

Ouch.

Because of its lack of income taxes, the poorest 20% in Texas, who make less than $19,000 a year (often for working) pay an average tax rate of 12.6%. Your income, even though you no longer have to work for it, puts you in the top 20% in Texas, which makes over $90,000 a year and pays an average tax rate of 6.1%. 60% of Texas households make less than $52,000 a year.

Maybe your income is just unusually high this year because of some big capital gains, but even $70,000 a year for not working - is rich.

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Response to hfojvt (Reply #18)

Tue Feb 26, 2013, 05:00 PM

21. It's more of a case of him having benefited from union membership

Since the OP was a Federal employee for many years, he has a pension. He's what America should be like - work hard all your life and you should see some improvement for your children.

The OP isn't Romney rich, but he's not poor like so many of us. It's the American Dream.

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Response to ellisonz (Reply #21)

Tue Feb 26, 2013, 05:31 PM

24. I was a member of the AFGE ....

 

... although it was a rather strange membership. My job was at a high enough level that I was considered "management." But, because I was also an engineer, I was also represented by the AFGE. I had no choice in the matter. I paid no dues, the union never contacted me, and I had no interaction with it at all, but I was considered "represented" by the union. I never did really figure out how that was supposed to work.

I was under the old Civil Service Retirement System, which the AFGE kept an eye on and made sure they kept up their contacts in Congress. My retirement benefits package didn't change much over the years, so I guess I am happy someone was watching over it.

And no, I am not poor. I grew up in the 60's, and was told that if we worked hard, went to college and learned to do something useful, we could obtain the American Dream. So I worked my way through engineering school, went directly into government service (via the military) and continued studying and improving my skill set. The system worked for me.

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Response to hfojvt (Reply #18)

Tue Feb 26, 2013, 05:14 PM

22. Maybe it's because I already spent 40 years working in a ....

 

... professional capacity in a job that required some education and continual training. I also lived frugally, paid all my debts, saved and invested a goodly part of my income. I always contributed the max to every retirement plan I had. I planned to retire in comfort. Should I feel bad about that?

If those making less than $19,000 a year in Texas are paying 12.6% tax, then it must be mostly payroll (FICA) tax. ( I hope you are not counting sales tax.) Because their federal income tax would be very low. If my income were from working, then yes, I would be paying FICA and my rate would be 6% more. But I already did my time working, and now receiving my entitlement back. But the OP was about Federal Income Tax, not total taxes, as everyone's situation in regard to total tax is different. Federal income tax is a constant.

Yes, my income was higher last year because of some one time capital gains, as I explained. But I still can not think of myself as "rich." I've led a thoroughly middle middle class existence for all of my life and hope to keep it.

Are you planning for your retirement? If so, I hope it is successful.

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Response to oldhippie (Reply #22)

Tue Feb 26, 2013, 05:36 PM

26. Don't worry - anybody using financial data on DU who is not homeless will inevitably be called rich

wouldn't surprise me if the homeless with a car to sleep in were too.

Your rate does seem a tad high compared to what it could be, but that's doubtless due to your limited deductions and stock gains.

My attitude is much like yours. I would love to be in a higher tax bracket and unhappy to be a lower one. Those who complain about paying even 39% (I am nowhere near that bracket either) should revel in the choices and lifestyle that the remaining 60% affords them. It is asinine to think that any marginal tax rate should disincentivize earnings. The Beatles didn't stop selling records after hitting "19 for you and one for me" rates after all..

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Response to dmallind (Reply #26)

Tue Feb 26, 2013, 07:28 PM

43. if you are in the top 20% you are in the top 20%

and that's not the middle.

In Texas, the middle quintile makes between $32,000 and $52,000 a year and even those people make more than 40% of their neighbors.

Where I live, six figures is a lot of money for somebody with a job, to say nothing of a retired person.

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Response to oldhippie (Reply #22)

Tue Feb 26, 2013, 07:23 PM

39. I am not asking you to feel bad

I am asking you to feel rich.

I doubt if you ever were "middle" class. You are in the top 20% even as a retired person. That puts you ABOVE 80% of your neighbors, and not in the middle.

By why should I not count sales tax?

You claimed to be "thankful" that you do not pay income taxes in TEXAS. Well, because they don't have a state income tax, they get more of their revenue from the sales tax, which falls more heavily on the poor.

Yes, I would say that you should feel bad for rejoicing at your double good fortune (first having a high income and second paying no state income taxes) when the 2nd part of that good fortune means a higher burden on people who are not blessed with a high income.

I have now spent about 27 years working, but not fortunate enough to get a job that required my two degrees or any continual training, except for that job I quit in 1986.

However much I plan for my retirement it is highly doubtful that I will be making even $70,000 as a retiree since I never made that much as a worker.

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Response to hfojvt (Reply #39)

Tue Feb 26, 2013, 07:31 PM

45. OK. Thank you for your comments ......

 

That's what I wanted comments for, different points of view.

I'll just comment that the reason I didn't want anyone to include sales tax, or FICA or Medicare taxes in this discussion is because, as I have explained in another post, I wanted to have a common reference for discussion, which is Federal Income Tax effective rate.

Thanks.

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Response to hfojvt (Reply #18)

Tue Feb 26, 2013, 06:46 PM

33. It is not for "not" working.

He is getting paid FOR working, from a pension! He worked decades for it. Please quit making it sound like he is taking some kind of handout. It is a benefit he EARNED.


Thank God for unions! Where have all the Labor Democrats gone?

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Response to Drahthaardogs (Reply #33)

Tue Feb 26, 2013, 07:50 PM

47. is a labor Democrat supposed to be applauding the rich?

And looking down at a working person?

If he gets his money because he puts time and effort in, then he works for it. If he doesn't have to put any time or effort in, then they are not working for it.

Past work does not count. Imagine that I work at a job that pays $180,000 a year for a decade and that I save $80,000 a year. Now after ten years, I have $900,000 in the bank. In the good old days, I could easily get 6% interest on a mere CD and thus would have an interest income (in this example) of $54,000.

That is money that I would make - without working. Now, there is no question that I earned that $900,000, but the fact that I earned it does not change the fact that I now have $54,000 in income that I am not working for.

And Unions or not, this economy does not have enough money to give everybody a six figure income, especially one they get for not working. http://www.democraticunderground.com/?com=view_post&forum=1002&pid=732414

And the more people with six figure incomes think "I am not rich" then it seems the less likely they are to sympathize and/or share with those who make much less, like those of us in the bottom 50%.

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Response to hfojvt (Reply #47)

Tue Feb 26, 2013, 08:54 PM

51. Why don't you join a union?

Your pay would be better, you would get vacation, you too could have a pension.

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Response to Drahthaardogs (Reply #51)

Tue Feb 26, 2013, 09:38 PM

53. then why doesn't everybody just join a union?

Oh, that's right, maybe because it is not that simple. Union jobs are pretty much like any other good paying job - only a lucky and/or dedicated few manage to get one.

And because I work for the government, my pay and benefits are already pretty good for the type of job I have. Even my part-time job had paid vacations, sick leave, holidays and yes, a pension.

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Response to hfojvt (Reply #53)

Tue Feb 26, 2013, 10:49 PM

54. So your pension is good, but his

Makes him less inclined to sympathize? You know what? You are just jealous that he makesmore money than you. Oh, most state employees can join the AFLCIO. Pay your dues and embrace solidarity.

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Response to Drahthaardogs (Reply #54)

Wed Feb 27, 2013, 01:38 AM

55. I work for the government

not the state. There are many levels of government - school districts, cities, townships, counties, etc.

And as you describe it, "embracing solidarity" would mean for me to pay dues and get no benefits, because paying union dues would not get me union wages. But what the heck, why shouldn't I chip in to help people making more money than myself, that's what solidarity is all about, isn't it - the poor helping the rich?

And isn't that the classic conservative complaint "liberals are just jealous of the rich".

I did not say my pension was good. I said my pay was fairly good. Not good enough to make me rich, like a GS-12, but pretty good for a janitor. I figure my pension will be $5,000 a year if I retire at age 55, which is my plan, come hell or high water. It would be a whopping $13,475 if I retired at age 62. With social security of perhaps $900 a month and IRA distributions of $4,000 a year, I would be making $29,000. Decent money for somebody who is not working, but a long, long way from six figures.

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Response to hfojvt (Reply #55)

Wed Feb 27, 2013, 07:24 AM

58. Your story has inconsistencies.

Assuming you are a janitor, you are a wage-grade employee, not a GS. If you are a janitor working for the feds, YOU should be happy. Your private sector counterparts get minimum wage and no benefits. There are very few of you left. I have not seen a WG janitor in over 12 years. I have NEVER seem a GS janitor. They were all (quite sadly I might add) contracted away to private industry a long time ago.

As an unskilled laborer, the fact that you have health insurance, a pension, and vacation and sick leave is awesome and far too rare these days. However, despite your protestations to the contrary, those nice benefits were provided to you by your union members at the AFLCIOI. To take the benefits (yes, you do get union wages and benefits, but not Davis-Bacon for unskilled labor) and not pay the dues sounds like a scab to me. Saying they do not benefit you...well that is just spitting in their face. Just an FYI, there is nothing worse than someone who cusses a farmer with a mouthful of food.

As for your pension, that also does not add up. If you have been a janitor for 27 years you are under not under FERS, but CSRS. You don't get Social Security, you have a private account (much like PERA). FERS went into effect in 1987, so you made it, but barely. You should, have the old system, which is known as the "golden handcuffs". If you opted out of CSRS, that was really a bad move on your part.

In addition, if you are (for some weird reason) you are under FERS, you do not have an IRA. You belong to the Thrift Savings Plan which is different and you know it. Your employer also matches the first 5% of your contributions -- you union members say "your welcome". If you are under CSRS, you can still contribute to the TSP, but your employer will not match contributions.


Is this really just a troll on your part to try to make a point?

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Response to Drahthaardogs (Reply #58)

Thu Feb 28, 2013, 02:32 PM

60. you make a lot of assumptions

as I said - I work for the government. I did not say the federal government. I mentioned GS-12 because those people make enough money, IMO, to be rich.

Also, with an IRA - anybody can create one of those - they are private retirement accounts, subsidized by the federal government. I put $6,000 in my account this year and therefore got to deduct that amount on line 32 of form 1040. I also got a $200 credit from line 50.

I said I have been working for 27 years, I did not say I was doing it for the same employer. I was not lucky enough to get a good job right out of college and stick with it.

Okay, actually I was. I was a GS-7 potential 12 working for the military industrial complex helping to create weapons of mass destruction - until I quit after a year.

You dividing the working class between unskilled and skilled seems kinda telling to me. You expect somebody running their tail off to be grateful for their semi-decent wages, while apparently the skilled worker who sits at a desk pushing papers around deserves their much higher pay. And I better not dare call such a person "rich". In fact, I should pay union dues to support my solidarity with those much higher paid workers.

From where I sit, the AFLCIO seems mostly about getting much higher wages for other people and doing next to nothing for me. Tom Brady can pay them union dues. There's a guy getting union benefits, but what the heck, I am supposed to be happy and pay for the benefits that supposedly trickle down to me from a union member like Tom Brady.

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Response to hfojvt (Reply #18)

Wed Feb 27, 2013, 07:13 AM

57. crips, $100,000 a year

 

And you think you're not rich?

I'm one of the parasitic 47%. I worked all my adult life, and I live on $19,000 Social Security and a few thousands dollars in interest on my savings (suck eggs, Fed.) I have high deductions on Sched A so my federal taxes were zero. My RI taxes were several hundred dollars. RI really socks it to low income people.

Edited to say, to me rich means never having to worry about money.

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Response to oldhippie (Original post)

Tue Feb 26, 2013, 05:29 PM

23. I plan to use TaxActOnline which I used last year.

It cost $10 and worked fine. I think I get a $2 discount this year.

My taxes are very simple this year, but I will probably owe something
but not that much.

I expect to pay about 15% in federal taxes.

My income for 2012 was about $68,000.
It will be about $60,000 this year, and for 2014 will be about
$54,000 because I will stop working for money this May.

Life is good for me, and I also appreciate the difficulties that
others have in this ugly meanspirited economic world. I did not
intentionally or happily vote for anyone who toes the corporate
line, but I wasn't given many choices either.

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Response to oldhippie (Original post)

Tue Feb 26, 2013, 05:42 PM

28. Does anyone know if I should still file joint although my spouse passed in March 2012?..

He was still employed and was working. I got his W2. We have filed with Turbotax for years. I'm confused but it makes sense to still file joint for this last time. Am I right?

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Response to Little Star (Reply #28)

Tue Feb 26, 2013, 07:07 PM

36. I'm really sorry for your loss

You would probably still file jointly. When I looked into this issue for my grandma, it was recommended to run the numbers both as filing jointly and filing separately and go with whichever is most advantageous. But that's been several years ago so it may not be true anymore.

The IRS has a help page with a FAQ and contact info here - http://www.irs.gov/uac/Help-With-Tax-Questions

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Response to A Little Weird (Reply #36)

Tue Feb 26, 2013, 07:25 PM

41. Thank You. I'll look at that link so thanks for that also.

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Response to Little Star (Reply #41)

Tue Feb 26, 2013, 09:04 PM

52. You might want to call up the IRS and ask them.

I am sorry to hear about yr loss, Little Star. My condolences.

Now tax wise, if he died this year (in 2013) then the following is not an issue. But if he died at any point last year, he owes for Social Security payments, I imagine, so it might be he wouldn't owe for the full year, but pro-rated so you are paying only for that portion of the year that he was alive, I believe. Since indie contractors pay over 15% and normal workers pay over 7, this can be a significant difference.

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Response to A Little Weird (Reply #36)

Fri Mar 1, 2013, 11:23 AM

61. I looked at your link and found....

my answer. Thanks again for the guidance.


Spouse died during the year.

If your spouse died during the year, you are considered married for the whole year for filing status purposes.

If you did not remarry before the end of the tax year, you can file a joint return for yourself and your deceased spouse. For the next 2 years, you may be entitled to the special benefits described later under Qualifying Widow(er) With Dependent Child.

If you remarried before the end of the tax year, you can file a joint return with your new spouse. Your deceased spouse's filing status is married filing separately for that year.

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Response to Little Star (Reply #28)

Tue Feb 26, 2013, 07:21 PM

38. I haven't had to deal with that yet .....

 

... but a quick look at the instructions for form 1040, filing status, looks like you will still file jointly for 2012.

I'm sorry for the passing of your spouse and having to deal with this. I hope I don't have to do it for a long time to come.

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Response to oldhippie (Reply #38)

Tue Feb 26, 2013, 07:27 PM

42. Thank You and I too hope you have a very long time before you ever have to deal with this.

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Response to oldhippie (Original post)

Tue Feb 26, 2013, 05:51 PM

29. My pension is $4310.00 gross a month

And they take out $612.00 in Federal taxes

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Response to bigdarryl (Reply #29)

Tue Feb 26, 2013, 07:23 PM

40. Do you usually get a small refund ...

 

... or have to pay more? I like to have mine set up to have a small refund each year. Sure feels a lot better than sending in more money!

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Response to oldhippie (Original post)

Tue Feb 26, 2013, 05:58 PM

30. Rejoice if you get to pay taxes!

My sister, who worked until age 52, when she became completely disabled doesn't pay a dime in taxes. The down side is that her care is $90,000.00 a year. What a tragedy. Please live it up and enjoy your retirement. You have a great attitude and I can imagine that you do have some fun every day!!

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Response to peace13 (Reply #30)

Tue Feb 26, 2013, 06:10 PM

31. That's what my dad always said .....

 

"The more taxes you have to pay the happier you should be!"

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Response to oldhippie (Original post)

Tue Feb 26, 2013, 06:34 PM

32. Say what?

How can you not have any adjustments? The standard deduction? Exemptions? I thought everyone got those.

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Response to FreeJoe (Reply #32)

Tue Feb 26, 2013, 06:59 PM

35. Deductions and exemptions are on the back of ....

 

... the 1040, after the adjustments to get to Adjusted Gross Income on the bottom of page one.

I took the standard deduction and exemptions.

Adjustments are for educational expenses, moving expenses, student loan interest, etc. I didn't have any of those. I did have one small ($250) adjustment for the deduction for my part of the self-employment tax for a couple days of consulting income.

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Response to oldhippie (Original post)

Tue Feb 26, 2013, 06:50 PM

34. Rates

It's hard to calculate true rates. My "Effective Tax Rate" according to Turbo Tax was 20.85%.

That's just what I paid in federal income tax divided by my Adjusted Gross Income. It doesn't include FICA or Medicare taxes. It doesn't include the "employer paid" portion of either of those taxes. It doesn't include deferred income like 401K contributions, 401K matching contributions, gains inside of retirement accounts or college savings accounts, or pension contributions. It doesn't include tax free income inside of a Roth IRA. It doesn't include health savings account contributions or income. It doesn't include income from qualified dividends. It doesn't include non-taxable benefits like medical, vision, or dental insurance and a portion of my company paid life insurance. It doesn't include stock options that haven't been exercised or stock grants that haven't vested. It doesn't include unrealized capital gains. I'm sure that other people have lots of other income excluded from taxation as well, so it is hard to really compare apples-to-apples.

If I wanted to make my best guest comparison of total realized income this year (excluding deferred income that will be taxed someday in the future and income inside of 529 and Roth plans) compared with total federal taxes (income, FICA, Medicare), I think the rate would work out to something like 22.5%.

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Response to FreeJoe (Reply #34)

Tue Feb 26, 2013, 07:14 PM

37. I guess that was a point I was trying to make ......

 

We all talk about taxes and tax rates without using a common basis. Some include FICA and Medicare, some include deferred income, some don't. I don't include FICA because I don't pay it anymore (well, except for a few days of consulting last year.) Each of us has our own situation with a lot of variables. That's why I tried to standardize this OP on just Federal Income Tax effective rate, which is, as you said, Tax (line 61) Adjusted Gross Income (line 37) or sometimes Taxable Income (line 43). I am trying to pin down just one term. As you can see, it's pretty hard.

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Response to oldhippie (Original post)

Tue Feb 26, 2013, 07:28 PM

44. 15%? Mitt Romney pays 13.9%.

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Response to oldhippie (Original post)

Tue Feb 26, 2013, 07:56 PM

48. I used TurboTax as well. Here are my numbers:

Tax on Total Income: 9.55%
Tax on Adjusted Gross Income: 10.15%
Tax on Taxable Income: 13.53%

My total income was just over $40,000, with AGI and taxable income being less than that.

And this is just federal income taxes -- no FICA taxes or state income taxes are included.

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Response to W_HAMILTON (Reply #48)

Tue Feb 26, 2013, 08:27 PM

50. Thanks

 

I'm glad you followed the format from the OP as now we have comparable numbers.

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Response to oldhippie (Reply #50)

Wed Feb 27, 2013, 06:48 AM

56. My numbers in your format


And here are the effective tax rates:
Tax on Total Income: 20.8%
Tax on Adjusted Gross Income: 20.8% (I don't have any adjustments)
Tax on Taxable Income: 23.3%

Those numbers, based on the Form 1040, come from:

1) Line 61 / Line 22 (Total Tax / Total Income)
2) Line 61 / Line 37 (Total Tax / Adjusted Gross Income )
3) Line 61 / Line 43 (Total Tax / Taxable Income)

I was subject to the Alternative Minimum Tax this year. My AGI was down 36.7% from last year.

I am not retired. I'm in my prime earning years (late 40s). I'm very happy with my income and not bothered at all by my tax rates. Of course, I take advantage of many tax breaks to minimize my tax rate. In the last year, I converted money from an IRA to a Roth IRA, made contributions to a 401K, made contributions to a pension, received pre-tax health/dental/vision insurance, received a pre-tax life insurance benefit, contributed to a 529 college savings plan, and contributed to a Health Savings Account.

I still don't know how this would compare to a "1%er". I'm sure that if I looked at the comparable numbers on their tax form, it would look like they paid an even higher rate. I'm just as sure that the reality would be different because they would have done even more to avoid having income show up as income from tax purposes. So if I looked at Mitt Romney's final Form 1040 and compared the same lines, it would look like he was paying a really high tax rate, but the reality is that he is probably paying much, much less.

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Response to FreeJoe (Reply #56)

Wed Feb 27, 2013, 09:54 AM

59. Thank you for those numbers, and your comments ....

 

.... which I believe are right on, and actually make the point I was trying to make better than I did. Everyone's tax situation is different. The tax code is huge and complicated and has hundreds of loopholes (or incentives) to encourage (or punish) certain behaviors. When I hear a comment like above "Romney pays 13.9%" I have to wonder what two lines on the 1040 that is calculated from. And I think it probably wasn't calculated that way, but is an estimate figuring in all the loopholes and incentives he uses. That's why I wanted to use my 1040 lines definitions to at least have a (if low level) consistent basis for a comparison.

All of those "loopholes" and "incentives" were put into the tax code to encourage certain behaviors, not to enhance revenue. Yes, some of them were pushed by lobbyists for certain industries to get a tax break for themselves, and rationalized them by pointing out certain benefits to the taxpayers. And the legislature falls for it. But many of the provisions were put in for very good reasons to benefit the populace. The IRA and other retirement savings provisions, education deductions and credits, medical provisions, and many other "loopholes" are put to good use by many of us, and we wouldn't want those to be eliminated, would we? There are good loopholes and bad loopholes, depending on your perspective.

Anyway, I guess the point I was trying to make is that just throwing out that Mr XXXX pays a tax rate of xx.x% doesn't really mean much to me unless I know the basis of the numbers. People can pick and choose their numbers to push whatever agenda they wish. My poor little old engineer brain can deal with a certain amount of complexity, but I need to know the basis of the calculations to really understand what is going on.

Again, thank you for your comments.

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