2020 Taxes

Discussion in 'Finance, Investments, and Careers' started by Russ Smith, Jan 22, 2021.

  1. Russ Smith

    Russ Smith The Original Whizzinator Contributor

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    It's too early to know for sure don't have anywhere near all my documentation but as has been pointed out for months now the changes Trump made in taxes would likely result in lots of people being surprised with theirs in 2020.

    I got my W2 today and downloaded the info into Turbo Tax. So far all I have in there is income from W2, my inherited IRA RMD, and my car registration renewal form, which won't even count since I won't itemize. Based solely on that I owe just over $1000 to feds and $459 to the state. There's more income to come from stocks, interest on CD's and money markets etc but right now I have to say it's fairly obvious that as was pointed out repeatedly when Trump "gave us more money" what he did was lower the amount deducted on your paycheck, so the money you might normally get back at the end of the year, was instead going into your paycheck. The problem is they didn't do it "correctly" they did it to try and increase paychecks as a campaign strategy, I'm giving you more money so vote for me. So as was pointed out repeatedly in financial stories, people who did calculations came to the conclusion that people were going to be surprised when they not only didn't get a tax refund, they owed money. I actually adjusted my withholdings to take out more to try and counter this, and I increased my 401K contribution, but it appears I'm still under withheld.

    now yes I know it's better to get nothing back and have it in every paycheck than get a big return but lots of people literally base their spending early in the year on an assumption of getting a tax return. Will be very interesting to see. I talked to 2 people at work who'd input their W2's also, they both likely make substantially more than I do, and both of them said they currently owed several thousand dollars and were hopeful the rest of their returns would improve the situation.

    If this holds true for the majority of people just watch the GOP blame it on Biden, see he's already raised your taxes.
     
  2. Dback Jon

    Dback Jon Killer Snail Contributor

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    I am dreading mine.

    And yes the sheep will blame Biden.
    But 100% on the GOP - especially Trump and McConnell
     
  3. elindholm

    elindholm edited for content

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    I dramatically increased my withholding so I'm hoping I'll be okay.
     
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  4. Beaver

    Beaver Maximum Effort

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    We get about $800 back, well below our usual $4,000 return. Lose a thousand or so because of the SALT limit. First time using the standard deduction since our home refinance lowered our interest for the year.
     
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  5. Russ Smith

    Russ Smith The Original Whizzinator Contributor

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    Added in my interest from CD and money market this morning, now owe over 1100 to Feds and 549 to state. and I still have income from stock sales. I have a managed brokerage account with Wells Fargo but I don't think she sold very much this year so I don't expect much income from that despite the balance on paper having gone way up due to the markets.

    But it appears I'm going to owe close to 2000 combined, and again I increased my 401k and my witholdings to try and account for this. I haven't done the math yet on making a 2022 IRA contribution to see how much that lowers it, sometimes there's a sweetspot where you can instead of giving 2K to the feds, you make the contribution and it gets you much closer to level off on your taxes.

    I think this is going to be a "thing" this year so it'll be interesting to follow if Biden makes many changes. People are already complaining my paycheck is smaller damn Biden but its' because the changed Trump made expired, has nothing to do with Biden.
    So if they do nothing, in theory people won't have the tax surprise next year.
     
  6. Folster

    Folster he/haw

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    How much you owe or get back from filing your taxes is a meaningless figure when determining your tax burden. The only honest way of discussing this is to calculate and disclose your effective tax rate. It's very simple to calculate. Divide your total taxes owed by your adjusted gross income. Then compare that rate to previous years while taking into account any increases or decreases in income.

    I don't get why people are whining about getting to keep more of their money out of their paycheck throughout the year or celebrating a big refund that they let the IRS borrow interest free.

    My wife and I consider a tax success by how close our refund/payment is to zero.
     
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  7. BigRedRage

    BigRedRage Reckless Contributor

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    I have not even started to file this year yet but hopefully this time I do not owe money again.
     
  8. Beaver

    Beaver Maximum Effort

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    2018 ETR 6.10%
    2019 ETR 8.57%
    2020 ETR 10.7%

    Those "tax cuts" are really working out for my family!
     
  9. Folster

    Folster he/haw

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    Those are really low effective tax rates, even below the lowest tax rate of 10%. It's hard to complain at that point.

    Regardless of the increase that you posted, it still doesn't allow us to draw and meaningful conclusions. An increase would make sense if your income also increased or if you lost a significant deduction or credit during that time.
     
  10. Devilmaycare

    Devilmaycare Registered

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    I got my W2 yesterday so I ran it through Turbotax and my numbers looks pretty good for the year. Slightly better than last yea and I have a 3.5% income increase in 2020. I ended up owing $28 to the feds vs $98 last year. State I'm getting back just about $500 vs a $400 refund last year. I don't have my ETR on hand right now but eyeballing I think it's around 17-18% which is about normal. So what ever changes that were made last year didn't really affect mine.
     
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  11. Russ Smith

    Russ Smith The Original Whizzinator Contributor

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    I fully agree but lots of people literally build a strategy around a tax refund and I think many of those people are going to be caught off guard this year when they don't get one.
     
  12. Yuma

    Yuma Working from home. Missing my free coffee!

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    So when the Trump tax cut was coming, I read about it and told all my friends and family to increase their W2 withholding. We did at my house, but haven't done our taxes yet. I will update when we do.
     
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  13. elindholm

    elindholm edited for content

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    Hadn't run the numbers for a while, but, to my surprise, Trump did lower our taxes. Our effective federal tax rate was about 1% lower in 2018 and 2019 than it was in 2016 and 2017. But the difference is due to the child tax credit, which our child is about to outgrow (maybe as early as 2020, can't remember the cutoff), so then we'll be back above end-Obama levels.
     
  14. Russ Smith

    Russ Smith The Original Whizzinator Contributor

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    Something is definitely screwy for me. I witheld the full amount on unemployment for the 2 weeks of furlough we had and it still made me owe $100 dollars more. I'm pretty sure there wasn't an option to voluntarily take out more from the EDD payment. It wasonly 2100 combined too.
     
  15. Devilmaycare

    Devilmaycare Registered

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    I was talking with my buddy yesterday about taxes this year and we were saying that we think a lot of people are going to get screwed this April due to unemployment. There are going to be tax bills that are unexpected due to them not being accounted for correctly.

    I've been saying the same thing with the whole GME saga. I've been seeing posts where almost no one seems to understand capital gains tax. I really hope some of them put aside enough money to cover them. Even some of the guys that do account for them better realize they might jump up a tax bracket. I pointed that out to the guy at work that made bank off of it and he had an "oh crap" moment because he didn't think of the bracket change. So he had to rework his plans slightly to account for it.
     
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