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Thread: Taxes too high?

  1. #1
    Veteran Member Starxx's Avatar
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    Default Taxes too high?

    So I filed taxes a while ago (for the first time!)and haven't written the checks yet but I have a feeling it may be wrong. I owe a lot, but I'm a student and I bought a new car so I know that should be numerous deductions.

    I went to H&R block which I now see every says don't go there. The guy didn't seem like he really knew what he was doing. He was plugging numbers in of course, but when there would be pop ups I feel like he had absolutely no idea what they were for and was just plugging in yes or no.

    So what should I do? Go back? Or try and run my numbers through a free program online?

    I'm not sure if I can post my numbers here or not, but I'm claiming I made 32,000 and I had a w-2 for 8,000 and I paid 7,500 for school and 2,500 on my new car sales tax. According to H&R, I owe 6200 between fed and state.

    Does that sound right? Or should I look into it?

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    Featured Member MarvelGirl's Avatar
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    Default Re: Taxes too high?

    That sounds very wrong to me but I'm married with kids so I'm sure that makes a big difference.

    The guy at H&R block was just using the same program you can use at home online. I know people who have worked there who knew NOTHING about taxes so he's useless.

    I'd call an accountant. 6200 on 32000 is insane but again, I'm coming from a state with no state tax and I have several dependents.

    If you want to try running it yourself, check turbotax and taxactonline. I hate the h&r block program and think it's a pain in the ass. You can run your own taxes for free and see if the numbers come up drastically different. It will at least give you an idea of what you owe even if you do go with an accountant.

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    Banned Melonie's Avatar
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    Default Re: Taxes too high?

    Actually, $6200 in tax liability on a $32,000 income ... a good portion of which is 'independent contractor' income subject to both the employer's and employee's share of Social Security and medicare tax ... isn't surprising. In actuality it represents a 19% effective tax rate between federal and state taxes. This isn't all that far out of line given that the 'independent contractor' income is subject to a 15.3% Social Security and medicare tax, given that no major major tax deductions i.e. mortgage interest and property tax payments are available, no dependents can be claimed, etc.

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    God/dess Zofia's Avatar
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    Default Re: Taxes too high?

    I agree with Mel, the numbers look close. I suspect most of the tax liability is for the self-employment tax. Basically social security and medicare. Those two taxes start at dollar one.

    HTH
    Z

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    Default Re: Taxes too high?

    Did they deduct any taxes from your W-2 already? Did you enter that in your 1040?

    Also..don't forget to calculate your self-employment expenses from dancing, they will help lower your self-employed tax liability. As for school, I'm not sure but can you deduct the full cost of your tuition? Can you qualify for Educational credits?

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    God/dess Deogol's Avatar
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    Default Re: Taxes too high?

    The numbers look right, but I wonder if the educational credits were overlooked? Were you full time?

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    God/dess shasta's Avatar
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    Default Re: Taxes too high?

    The numbers actually look about right to me. I pay a really great accountant 350 dollars a year, and those numbers seem fine. You are paying less than 30 percent on the 24k claimed as an independent contractor. I know it sucks, but like mel said, most of it goes to social security so that is just how it goes. You can put up to 25% of your gross income into a SEP IRA (self employed pension plan). That money is not taxed in your income (it is taxed when you retire and take it out). So, opening a SEP IRA is another way to create a tax shelter. Your healthcare expenses are also deductable. I have a HSA (Health Savings Account), which is NEVER TAXED if you use it for med expenses and you can roll it over into the next year (and forever).

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    Featured Member MarvelGirl's Avatar
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    Default Re: Taxes too high?

    oh gosh, I'm dumb. I'm sitting here thinking that 32,000 isn't a lot of money but I'm married and I file jointly.

    Forget what I said, it's been a rough day, lol. This thread does make me glad that I have a house and kids though, yeowch.

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    Default Re: Taxes too high?

    not wanting to change the subject, but ...

    You can put up to 25% of your gross income into a SEP IRA (self employed pension plan). That money is not taxed in your income (it is taxed when you retire and take it out). So, opening a SEP IRA is another way to create a tax shelter. Your healthcare expenses are also deductable. I have a HSA (Health Savings Account), which is NEVER TAXED if you use it for med expenses and you can roll it over into the next year (and forever)
    These days, one needs to be careful when making sweeping statements about existing gov't sanctioned tax deferred / tax exempt programs going on 'forever'. In point of fact, the new national health care law has just placed restrictions on HSA's ... both in terms of the annual contribution limit as well as in terms of the types of medical expenses the HSA money can be spent on. Similarly, the whole premise of a tax deferred IRA ( SEP or otherwise ) serving as a tax 'shelter' is only true if the program still exists unchanged by the time you reach age 59 1/2 and if the effective income tax rates at that time are lower than the tax rates which apply today.

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