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Just finished doing our state and federal income taxes with TurboTax. We had a total wash -- no refund and no payment!

Both were e-filed the same day and accepted.

Finis. Feels good.

Vermonter
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Congrats! The hubster hopes to finish today. We usually get a little back from both Feds and state, but it'll be a whole new ballgame starting with 2013 taxes as we're moving from living on his salary to living on Social Security, savings, and small pension. We need to pay quarterly this year, but once we have a better handle on the amounts, I hope he can simply set up right-sized tax withdrawals from the larger of the small pensions. As we get older, it's nice to have more things automated.
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We are always amazed that we pay no taxes at all. We both collect SS income, I pull several thousand a year from my IRA to supplement that, I get a small pension of about $350/month (which just pays Medigap costs), and she gets a small amount from stock dividends. It's not a bad amount, but we're far from well off!

We've paid NO state or federal taxes at all for 4 years now, so maybe you'll do okay!

Good luck!

Vermonter
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I pull several thousand a year from my IRA to supplement that, I get a small pension of about $350/month (which just pays Medigap costs), and she gets a small amount from stock dividends.

If you're both over 65 you don't have to file if your gross income excluding Social Security is less than $21,800. That's the 2012 number; it goes up each year. With your several year history of zero tax it's likely you don't have to file at all unless you're reaching zero tax through itemized deductions.

Phil
Rule Your Retirement Home Fool
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Phil:

Is that so??? We may not exceed that!

Hell, I'd be glad to avoid the chore. But do we have to notify IRS or anything? Where can I find that rule? On the IRS site, perhaps?

Thanks.

Vermonter
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Phil:

Also, each time I wade through all the deductions, TurboTax ends up saying they are applying the Standard Deduction, which is "better"!

Vermonter
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TurboTax ends up saying they are applying the Standard Deduction, which is "better"!

Property taxes and or mortgage interest are usually the deductions that qualify you to itemize. Once you qualify, charitable deductions are easy.

In the days of big insurance payments or dental disasters, medical deductions were possible but usually small after a big threshold. This year for the second time I did not qualify. Less than the 7% agi.

Investment costs, research costs, and job related costs are also deductible, but I have trouble making the threshold.

Of course if you live simply and have none of those things to worry about, standard deduction saves lots of paperwork and hassles.
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I'd be glad to avoid the chore. But do we have to notify IRS or anything? Where can I find that rule?

In any of the 1040 series instructions you'll find "Who must file?" If you don't meet the filing requirement you don't need to tell the IRS anything.

Phil
Rule Your Retirement Home Fool
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If you're both over 65 you don't have to file if your gross income excluding Social Security is less than $21,800. That's the 2012 number; it goes up each year.

You made me curious, especially on behalf of my Mom, and the figure for singles is $11,200 for 2012 (so she doesn't qualify). How do you define "over 65"...if you both turn 65 in 2012, does this rule apply to filing 2012 taxes, or would you need to turn 65 before 2012?

Also...I thought you had to pay income taxes if your income as a couple was at least $32k and $25k for individuals, including Social Security. At least that's what it says on the SSA site:

"You will have to pay federal taxes on your Social Security benefits if you file a federal tax return as an individual and your total income is more than $25,000. If you file a joint return, you will have to pay taxes if you and your spouse have a total income of more than $32,000."

http://ssa-custhelp.ssa.gov/app/answers/detail/a_id/493/~/pa...

When your statement and SSA's are in conflict, which takes precedence? Do they both need to be true to avoid federal income tax? For example, suppose a 65+ couple gets $40k in SS income and $20k in other income--do they file/pay federal income tax or not?
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How do you define "over 65"...if you both turn 65 in 2012, does this rule apply to filing 2012 taxes, or would you need to turn 65 before 2012?

I define "over 65" as at least 66, thus I apologize. I should have said "65 or older as of the end of the tax year." (See general comments below.)

Also...I thought you had to pay income taxes if your income as a couple was at least $32k and $25k for individuals, including Social Security. At least that's what it says on the SSA site:

"You will have to pay federal taxes on your Social Security benefits if you file a federal tax return as an individual and your total income is more than $25,000. If you file a joint return, you will have to pay taxes if you and your spouse have a total income of more than $32,000."

http://ssa-custhelp.ssa.gov/app/answers/detail/a_id/493/~/pa......


Indeed it does say that. It's poorly worded. It should have said "You may have to pay...." In fairness to the SSA, you quoted only the first paragraph of that FAQ page. Immediately following is verbiage directing you to the back of your 1099 for more information. There you'll find that the subject really is how much, if any, of your SS benefit is included in your gross income. This can be anything from 0% to 85%. (See general comments below.)

When your statement and SSA's are in conflict, which takes precedence?

Mine, of course. They're never entertaining. I hit the mark now and again.

Do they both need to be true to avoid federal income tax? For example, suppose a 65+ couple gets $40k in SS income and $20k in other income--do they file/pay federal income tax or not?

Possibly. This is one where I'd do the calculation. (Final "see general comments below.")

You read about them in People Magazine. Here are the much heralded "General Comments."

1. You asked about precedence. Neither what I write nor what you see at the SSA website or an IRS publication has any. What you see in all of these is a good-faith effort to turn incredibly complicated statutory language into something useful. I think we all do a remarkable job, but the reader needs to help. Which brings us to

2. Confess to selective reading and I'm sure the judge will let you off easy. You evidently stopped reading after the first paragraph of the SSA link. This is a common error when reading anything regarding tax law. "God, I really don't want to slog through this, so that sounds good enough to me." There's almost always a "but...or if..." lurking.

You also have to contribute some thought. There's no way the SSA could know whether you were going to have to pay tax or not, regardless of your income. Do they know whether you itemize deductions, or whether you're supporting 23 grandchildren?

3. Be careful when you're eavesdropping. Read in a total vacuum there were two problems with my original post in this thread. One I've addressed. The other is that it's a relatively recent (2009 I think) development that in some cases you have to do the SS calculation to determine filing requirement. It used to be that if you didn't have at least the filing requirement in non-SSA income none of your SS benefit would be taxable even if you received the maximum SS benefit. However, the $25,000 and $32,000 numbers are fixed in law for at least 20 years, while the maximum SS benefit has grown. Thus in the fact pattern you presented there may be a filing requirement.

But back to the eavesdropping part. My original comment wasn't a lesson in the taxation of SS benefits, it was part of a conversation directed to Retired Vermonter, who hasn't had to pay tax the last 4 years. I'll stand by what I said to him.

Lurkers need to remember that different facts can lead to different answers, especially when dealing with tax law. I've rarely heard a tax law question that had any really correct answer other than "it depends." More information is almost always needed, so don't draw too much of a conclusion from the answer to someone else's question.

Phil
Rule Your Retirement Home Fool
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Thanks, Phil. Yes, I did notice you were speaking to Vermonter, but I googled for more info. You're right that I didn't read that whole SSA document before posting (geez, it showed!?!), but I did afterwards. It's still not very clear to me. There's a reason my involvement in doing our taxes mostly consists of "sign here."
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I am thinking evil thoughts about the lot of you. Already got your return? Did it all on TurboTax? Paid no tax at all? A pox on all of you.

We came back from the accountant on Friday, weeping bitterly. She sez we owe the Feds about $9K. We must make a lot of money, because we pay a lot of tax. Somehow I don't see the "make a lot of money" part. My wife's small business, my RMD, etc all adds up, I suppose.

Maybe she (accountant) will find a mistake as she does the final forms. (Yeah, right. Dream on.)

Count No'Count
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"I am thinking evil thoughts about the lot of you. Already got your return? Did it all on TurboTax? Paid no tax at all? A pox on all of you.

We came back from the accountant on Friday, weeping bitterly. She sez we owe the Feds about $9K. We must make a lot of money, because we pay a lot of tax. Somehow I don't see the "make a lot of money" part. My wife's small business, my RMD, etc all adds up, I suppose."



I did my taxes with H&R Tax Cut. Took about 3-4 hours. I had all the necessary paperwork in a folder. Wasn't missing anything. At least I think so.

I have to pay estimated taxes. Paid about 6% too much, so I get some back. Hard to guesstimate since you don't know what your funds will spin off, or if one or two raise dividends during the year.

Sounds like you should have been keeping up on estimates during the year. The IRS hates it when you 'owe' a lot at the end of the year, unless you had some big cap gains happening...or took your RMD at the end of the year - but then you should have sent in money in Jan.

Two weeks left for the procrastinators to get in gear and get done.



t.
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Two weeks left for the procrastinators to get in gear and get done.

I *was* going to do it early this year. Sigh.

But you know I'm a true procrastinator, because it should only take about 30 minutes to do. I just have 4 or 5 1099 forms to enter, and then I'm done.
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CountNoCount:

Why on "pox" on us? Really, we are all (I assume) playing fair and doing our returns properly!

Do you make a lot of money? I cannot say, nor can I nor should I judge you. However, $9,000/year is almost more than we get from all sources combined, other than Social Security, and we do not get a lot of SS money, either, having started at age 62, so, relatively speaking, either your accountant is doing nothing for you or you DO make a lot of money!

Are you taking all the right deductions? I wonder. And you must be having far too little deducted during the year, if you now get socked that way.

Sorry you feel upset, but I can only suggest you check to see if that accountant knows his/her onions, and then perhaps change whatever you do for the remainder of this year now.

Good luck.

Vermonter
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The 1040 instructions have a pretty clear table that says what Phil said about "Who must file?":

A married couple with $21,800 or less gross income, not counting SS income, need not file.

Vermonter
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RV: Sorry you feel upset, but I can only suggest you check to see if that accountant knows his/her onions, and then perhaps change whatever you do for the remainder of this year now.

Did you miss the <sarcasm> tag I had? Tsk, Tsk.

I actually don't have the figures in front of me now (all at the accountants). Believe me, I will be checking to see wha' hoppen. We've been with this accountant for years (no, decades), and she knows her onions (and her beans.) She had a question about our balance sheet, so I sent her a side-by-side sheet for 2012 and 2011. I think that will make things better. I am the "bookkeeper" for my wife's business, but I for darned sure am not an accountant.

The $9000 is $9000 MORE that our other withholdings. So, yes, we must make a lot of money. Sure doesn't seem like it, though.

Count No'Count
... I am from Texas, and I claim the right to a bit of hyperbole.
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The $9000 is $9000 MORE that our other withholdings.

Some random thoughts.

The $9,000 should not have been a surprise. If it was, you need to hone your ongoing system for monitoring the business's income and your estimated tax payments. Talk to the accountant.

Remember that the payroll tax holiday is over, so your wife's self-employment tax will go up for 2013. Plan accordingly.

I assume your wife has some sort of retirement plan set up. Remember that on top of that both of you can make Roth IRA contributions based on her earned income if you meet the income restriction. (IIRC you mentioned RMD's for yourself, which would mean that you're too old to make traditional IRA contributions.)

Phil
Rule Your Retirement Home Fool
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