Getting a jump on 2012 taxes

Parent Cafe
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<p>allyphoe–that is where a flat tax rate would come in handy, not having to define that stuff. You define income as money made. In your example, there was no money made, no taxes on the $5000. Employer provided benefits can be in their own classification, especially since health care will be mandatory. The current tax code is unnecessarily complicated and you have just shown why. Report all income—that is INcome–money you made or gained, take 10% of that, pay that to the government, done. </p>

<p>Business taxes I see no reason why they should not be able to deduct normal operating expenses like now and pay tax on the profits.</p>

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<p>Took another stab at TurboTax as I have some additional numbers to enter. TurboTax didn’t have any updates so I couldn’t enter them. They are still waiting on forms from the IRS. I imagine the engineers working at Intuit are basically on call for the rest of the year and probable for a month or two into 2013 - when new tax stuff comes out, they have to instantly analyze it and update their software.</p>

<p>I’m going to take a stab at state taxes (MA) for my son later this week. I’m hoping that those are a lot simpler.</p>

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<p>SteveMA, your 10 percent number is not even going to come close to paying for the govt. I understand your sentiments and we can have a simpler tax code than we have now, but when I read numbers like 10 percent thrown around, well, numbers like that, don’t make your case. Throwing numbers like 10 percent around, hurt your argument. Because the 10 percent number is so unrealistic. </p>

<p>We have Simpson- Bowles numbers. They are more realistic. They are also higher percentages.</p>

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<p>That’s a tautology.</p>

<p>How much money did this guy make / what’s his income?
Joe is employed by ABC Corp, a C-corporation, as the caretaker of ABC’s manufacturing facility. Joe’s base wages are $50,000 of which $10,000 was withheld for taxes: $3,000 for Social Security taxes, $5,000 in Federal income tax, and $2,000 of state income tax. Joe’s take-home pay was $40,000. ABC also paid $7,000 of health insurance premiums, $2,000 of short term disability premiums, and $13,000 of pension contributions. Joe’s employer lets him drive a company car which would have cost Joe $12,000 a year to lease and maintain, and requires him to live in a good-sized apartment attached to the facility, so he’s on premises should something happen to the building or equipment, at no cost to Joe.</p>

<p>Joe also owns a 95% interest in XYZ Partnership, which provides tech support via phone and internet to companies that own the same equipment used by ABC. Joe provides all the services performed. XYZ bills and collects $100,000 during the year and pays none of it to Joe or to the 5% partner - it just sits in the XYZ bank account.</p>

<p>Joe likes to gamble, and took $5,000 of his own cash to Vegas on December 31st. He won a $50,000 jackpot on his first pull, and took $54,999 in chips back to his room. The next day, January 1, he lost every penny of the $54,999, and went home with nothing.</p>

<p>Joe has a relatively simple and straightforward life. It should be easy to figure out how much money he made, and it should be obvious to every reader which items above go into that calculation. Right?</p>

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<p>Allyphoe, we make these decisions now. We can have a simpler tax code.</p>

<p>Joe, the gambler is screwed in your example. The rules can be changed.</p>

<p>I agree that SteveMA’s idea is too simplistic.</p>

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<p>Steve Forbes proposed a flat tax of around 17 or 18 percent.</p>

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<p>Yeah…and he proposed that the taxes he pays the most should be taxed at zero. :)</p>

<p>Forbes just made his stuff up…</p>

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<p>Just played around with investment income for 2012. I’m going to pay a lot of taxes … </p>

<p>I suppose that’s good in the overall scheme. I don’t have to make an estimated payment in January because I had more withheld than my liability last year. Oh well.</p>

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<p>That is very good.</p>

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<p>Every gambler gets screwed, in more ways than one. :)</p>

<p>You’re getting caught up in the idea that graduated rates and/or deductions are what creates tax complexity. Defining income is what creates tax complexity. Deductions are a subset of defining income, and graduated rates adds no more complexity than having multiple IRS Service Centers does. In either case, you look up in a table and are done.</p>

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<p>Well, sending off a million forms for transaction is a pretty big pain in the neck. I’m finally paying for tax software that downloads my transaction data and prints out the schedule Ds (if that’s the right form). Before, entering all of the stock transactions by hand was not a fun chore.</p>

<p>I don’t see why the IRS doesn’t create their own software to do returns. Yes, there’s a deduction for tax software and there’s a pretty big industry to do taxes (software, online and in-person). It would be interesting to see what value people place on their tax software. Mine is $89.99 but it’s probably worth $1,000 to me in terms of time saved, accuracy and avoidance of headaches.</p>

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<p>I am not confused. :)</p>

<p>I don’t find graduated rates complicated. I like graduated rates. I am in favor of a progressive income tax system.</p>

<p>Some deductions might be more complicated than others. Classifying income can also be complicated too. No argument there.</p>

<p>There are some deductions that are more straight forward. I really don’t think mortgage deduction interst or property taxes are complicated. I am not advocating this but we could say all charitable contributions of any kind are not deductible. Cap gains are taxed as ordinary income, etc. Your partnership example has happened to me. I paid the tax and
did not see the profits.</p>

<p>Some of the issues on what is income are complicated, but once those issues are decided, the actual filing of taxes may not be complicated. You get use of a car. You have to pay income taxes on this based on some formula. Of course, if the formula is not accurate, and the perk of the car is stated too low, taxpayers will want to be paid by the use of the use of a car instead of by money. :)</p>

<p>So allyphoe, you don’t like the various Simpson-Bowles tax plans?</p>

<p>I will say this…a lot of people are pushing for lower taxes and using tax simplification as a cover. ;)</p>

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<p>BCEagle91, I still don’t know why you enter each trade on your tax return. You don’t have to do this. I haven’t entered all my trades on a tax return since 1980. </p>

<p>I enter summaries based on brokerage accounts. The total receipts for all stock trades at Schwab, the total costs, etc. Then on to the next brokerage acct.</p>

<p>Well this year,
I just used Schwab…</p>

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<p>I entered summaries for a few years (I had something like several thousand trades one year) and then switched to TurboTax which prints out the trade. A $billion trade does look impressive.</p>

<p>At any rate, I was always under the impression that you’re supposed to enter all of your trades. I did the summary thing and would just hand the IRS agent my trade history if they wanted to see my trade.</p>

<p>These days, TurboTax does all of the work.</p>

<p>I may have used summaries to be practical but I didn’t think that it was the Kosher thing to do.</p>

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<p>Well my accountant is ok with it. There is a chance that because I am a professional trader that I don’t have to list all the trades. I don’t think so though. </p>

<p>My accountant doesn’t do anything if it isn’t kosher.</p>

<p>Several thousand trades in a year is a lot.</p>

<p>This year, I think Schwab is disappointed. I think I have only done a few of hundred or so…and that might be over counting the trades. Getting filled at different prices and counting that as multiple trades. I don’t know…maybe 200 real trades or less.</p>

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<p>What was your billion dollar trade? I have never done a billion dollar trade.</p>

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<p>Ameritrade, Etrade and Fidelity have been sending me offers of free seminars, webinars, Q&As, etc. I guess they’re trying to stimulate trading. I’ve been trading less this year as I’ve had other things to take care of.</p>

<p>I think that the brokerages are hurting like the HFTs were earlier this year. I think that 2012 is the retreat of the retail investor year.</p>

<p>BTW, I’ve been doing Fibonacci retracements on AAPL this week. Today was a bit of surprise - levels are 562, 550 and 540. I thought about it but there was serious downside acceleration today. The markets have felt like hedge fund liquidations. Strange moves in both directions in various stocks.</p>

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<p>Well, you were talking about summaries. If you summarize a year of transactions, you can get to a billion dollars with a lot less than a billion dollars.</p>

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<p>Ok on the billion…</p>

<p>You know I don’t think much of Fib. Zero actually.</p>

<p>The lack of trading has hurt hft. Big time. HFT is going to become an oligopoly with one caveat. There are microwaves set up to trade between between cities. The cost is lower than transmission lines. That might allow more for players. Of course, the more traders there are, the less profits there are and then bang, back to an oligopoly.</p>

<p>What were you trading when you were trading several thousand times a year?</p>

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<p>Gold, Silver, Tech, GE, MMM, energy.</p>