Taxes Again!

[drmamalove]

OK for all of you who itemize your deductions what kinds are you taking?

 I started out owing 23,000 I am down to 16,000 and it really sucks!  I tried doing mine and my husband separately. We lose our college deduction of 2,500 for my son if we do that so it didn't help. We now make too much money to even claim my other two kids.  I know this is a good thing but, I only made 79,000 (amazon and B&N) and I have my earnings down to 57,000. My husband makes over 100,000 so together were screwed.

How do people have tax shelters and still pay off the bills. I had been home for 15 years before this and some bills accumulated so I have been using the money I make to pay for my sons college and pay off bills and help support my parents.

Any ideas of deductions I might be missing?

[JETaylor]

Tax time always irritates the daylights out of me and now that my daughter is slated for college a year early - I started looking at the Possibility of deductions there too - but we are in the same boat as you- we don't qualify for either financial aid or allowed to take any deductions.  So yeah - I feel your pain.

As far as deductions - you might want to talk to a licensed accountant.  And if you aren't paying quarterly taxes - I'd suggest doing that because I don't think withholding is an option through either B&N or Amazon.  If you are and still owe that - then it's time for some IRAs or other means of tucking $ away.  An accountant can help direct you.  

I really feel your pain.
While I'm sure you've hit these - here are some of the deductions I take:
internet service,
advertising costs,
mail costs for contest winnings
organization fees
magazine subscription costs (Writers Digest or anything writing related)
home office costs
mileage
Conference fees and meals while I'm there as well as any travel expenses relating to this.

[JoshuaPSimon]

Just curious but at 79K, have you been paying quarterly taxes during the year?  If not, that's probably why it's so high.  You may want to look at changing your husband's withholdings as well if you think this will be a regular occurance.

[drmamalove]

No, I haven't been quartly. This really is the first year I made any real money. Last year I only had been doing it for three months and made less then 600.  Before this I had been at home and sub teach now and then so our income wasn't as high and we still had some of the deductions we lost.  We got back last year 3,000.

I knew the money was coming in but, man it was great when the money was deposited into my account.  Now that tax man is here I realize I should have been doing something else with this money except....shelter money....pay the bills you owe....pay for sons college.....help parents out fincially.....*sigh* can't do it all I guess.

Is there a way to put money into a college plan and take it out as early as fall tax free?  Yes I think I need to see an account before I am driven crazy.

As I am thrilled with the money I made....I realize that people who own their own business can really get screwed.

[MaryMcDonald]

I'm a little worried, but we'll be taking everything to an accountant next week. However, my dh was unemployed and underemployed for most of last year (not getting unemployment either, since he hadn't worked very long at the one job). So his earnings were very low. My day job has taxes taken out already, so I really just have to worry about my book earnings. Like you, I didn't make much in 2010, so I didn't worry about taxes. Last year, while not in your league of earnings, I made about half what I earn from my day job.

I'm hoping to deduct the cost of my new laptop, but I'm also wondering if I can deduct some of the cost of our internet service, since all my marketing, uploading, etc, is done from home via the internet. I have a few things like KND ads, that I'll deduct, but other than that, I'm a little lost.

[Al Schneider]

As I am thrilled with the money I made....I realize that people who own their own business can really get screwed.

Are you incorporated? If not, you should look in to it... The tax savings are incredible.

I just got done putting one through college and another one starting next year, so I feel your pain about no financial aid or reimbursements. People don't realize it but when you hit a certain income level you lose a LOT of deductions and credits, raising your taxes even more... ugh...

[J Dean]

Let me tell you how it will be
There's one for you, nineteen for me
Cause I'm the Taxman....

Should five percent appear too small
Be thankful I don't take it all...

[Sean Patrick Fox]

Your best bet is to get your taxes done by a professional. That way, you get all your deductions and you make sure it's done right.

[SherylNantus]

I'm hoping to deduct the cost of my new laptop, but I'm also wondering if I can deduct some of the cost of our internet service, since all my marketing, uploading, etc, is done from home via the internet. I have a few things like KND ads, that I'll deduct, but other than that, I'm a little lost.

I've used the same tax expert at H&R Block for over a decade - so don't panic if you can't find a good accountant right off the bat. Professionals can be found to help you!

Your accountant will be able to help you find a lot of good savings but I've always been able to deduct 12 months of paying for a website (over a hundred dollars there), a new laptop if/when needed (it might work better spread out over seven years - again, depends on your situation) and other items directly related to your work such as mailing costs. I'm not sure about the entire cost of your internet service but it never hurts to ask.

And yes, definitely pay quarterly wage taxes. The problem with being an independent contractor (which technically *all* authors are, whether with a publisher or not) is that you are responsible for all taxes. Whereas before your employer would scrape it off the top of your paycheck and you'd never see the money other than a note on your pay stub you're now responsible for *all* of the money. It's sort of interesting to see how much you end up paying in tax when you're the one doing the paperwork.

I wonder how much Konrath is going to end up paying...

 

[David 'Half-Orc' Dalglish]

Yeah, when you start making over 20k or so a year doing this, you really should swing by an accountant, as well as get quarterly payments set up. And being self-employed, the rates are going to hurt....sigh.

[drmamalove]

How do you become incorporated?  How do you handle variations in your income?  I will have to check into that.

You can deduct the full cost of the new computer if you use it only for this business.  I deducted mine.  You can chose to have it over a period of a couple years or all at once.  I also deducted a portion of the internet since I use it for business. I even deducted my camera because I use to make my covers.

I think your husband being unemployed will help your total tax liability.  He can claim even the money it took to look for a job. Good luck...This tax stuff stinks.

I really don't think people realize how much money the government takes the more money you make. I worked hard for my money like everyone else why do they have to take more from me. I feel like I get punished for making money....they are not getting a dime of this money until the last day to file.

[SherylNantus]

I really don't think people realize how much money the government takes the more money you make. I worked hard for my money like everyone else why do they have to take more from me. I feel like I get punished for making money....they are not getting a dime of this money until the last day to file.

Well, with all due respect - it's the price you pay to keep your roads in good working order, your public servants paid and your government running.

I bet if you looked at your husband's pay stub you'd see a large amount being yanked from his initial pay - but it's painless because it's taken right off the top and you never see it.

If you want to be your own business you'll have to deal with the harsh reality that you are the accountant as well - one suggestion I received was that you put away a quarter of your income per "paycheck" into a savings account to put forward towards taxes. That doesn't include quarterly taxes which you should pay every four months - otherwise you'll get a nasty surprise at Christmas where they want the amount plus more as a penalty for not paying before.

The tax system may not be perfect but you've had the advantage of keeping all the money through the years. When you get a tax "refund" you're really getting BACK money the government's been keeping and *making interest on* for the year. Some people would prefer to pay and not let the government make that extra cash.

A good accountant (I'd highly recommend H&R Block) can help you thread the needle on this. Unfortunately you may end up writing this year off.

 

[David 'Half-Orc' Dalglish]

After state and gov, I'm paying about 32% of my total income as taxes. It hurts, but monthly payments help reduce the ache...a little.

[Seanathin23]

Taxes suck but look on the bright side it is a good problem to be having right? 

[Sean Patrick Fox]

Quarterly payments don't change the amount you owe, they just ease the burden by breaking it up into four payments instead of one large payment, correct?

[David 'Half-Orc' Dalglish]

Quarterly payments don't change the amount you owe, they just ease the burden by breaking it up into four payments instead of one large payment, correct?

That, and if you start making so much, you're actually required to make monthly payments, or you might end up owing some penalties (another reason to get a professional to help you out).

[Al Schneider]

How do you become incorporated?  How do you handle variations in your income?  I will have to check into that.

Heed the advice that others gave and seek a tax professional (a good accountant) for the money stuff, but incorporating you can do yourself... even online!

I really don't think people realize how much money the government takes the more money you make. I worked hard for my money like everyone else why do they have to take more from me. I feel like I get punished for making money....they are not getting a dime of this money until the last day to file.

Welcome to today's America where half the people pay taxes so the other half don't have to

[valeriec80]

I saved 40% of my writing income from taxes, fearing the worst. Earlier this month, I did some research and number crunching, and decided that it probably wouldn't be nearly that much. But I was pleased when I turned out owing $1000 less than the lower number I had figured.

So, while I owed taxes, it sort of feels like I got a "refund," since I had money earmarked for the government that I now get to keep.

Now I need to figure out how to do the darned quarterly things so that I don't have to keep pretending that some of my money doesn't exist all the time.

[Alain Gomez]

You definitely need to talk to an accountant.  I have been self-employed teaching the violin for almost four years now and in my experience I have found that a good accountant is always worth the money.

Definitely talk to the accountant about incorporation.  The various start up companies (LLC, S-corp, incorporated) usually have fees attached to them.  I am a sole proprietor for my business.  But an accountant will help you to figure out which one will help you to save the most money.

If you haven't already, you need to set up a separate business checking account.  It makes things a lot easier come tax season.

Definitely switch to quarterlies.  If nothing else, it's a mental thing.  When I pay quarterlies I've already spent the money in my mind.  So at tax season I either don't owe anything or I get a refund which is nice.  This is way better than forking over 20k all at once (which happened to me and I needed lots of margaritas afterward).

An accountant will also help you to figure out what you have to deduct over the course of the year.  These are things to think about.  Ironically, you have to spend money to keep your money.

[meromana]

I really don't think people realize how much money the government takes the more money you make. I worked hard for my money like everyone else why do they have to take more from me. I feel like I get punished for making money....they are not getting a dime of this money until the last day to file.

I hear you.  When your household income gets up over about $100K or $120K, you start paying about half of each incremental dollar to one tax or another.  It's definitely a disincentive to working harder to make more money.

Well, with all due respect - it's the price you pay to keep your roads in good working order, your public servants paid and your government running.

One way to look at it, but the other is...why do the people making more money have to pay more for the same services?  Or really, for fewer services, since those making less have access to more gov't-provided services.  Not to mention that gov't-provided services are almost always less cost-effective than privately-provided ones.

It's just so depressing to get those yummy deposits from Amazon & B&N, and then have to turn around and give half of it to the government and get nothing in return...

--Maria

[Ann in Arlington]

Echoing those who suggest you talk to a tax professional.  Note it does NOT have to be an accountant. . .but should be an experienced professional.  You can find someone through State Accountancy Societies, or NAEA: the National Association of Enrolled Agents (IRS credentialed tax professionals), or NATP: the National Society of Tax Professionals (not necessarily 'officially' credentialed but generally more experienced.)  You can also find exceptional folks via the tax chains -- I work for H&R Block -- but you have to explain that you need someone with experience with self-employed individuals.

Do NOT WAIT until late March or April:  you may not be able to find anyone who has time to add a complex client that late in the season!   Ideally, I suggest people visit a tax pro as soon as they realize they've got something new and different happening -- even if it's June!  It's never bad to be prepared and a good person can clue you into all the records you need to be keeping to minimize your tax bill.

If you're self employed there might be any number of deductions that you're not used to taking -- talk to a tax pro and find out what can be claimed and get together the records so you can do so.  As a self employed person, you'll actually have to pay "self employment tax" of up to around 13% (for 2011) on your profit.  It's the equivalent of SS/Medicare for both employer and employee.  You'll get a partial deduction for approximately half, but it's a big extra that gets added on AFTER the income tax is calculated. Quarterly payments may indeed be required if you don't have enough income subject to withholding to cover your expected tax bill.

Then there's the state taxes. . . . . .

If you have not been in this situation before you are doing yourself a disservice by not at least having a consultation with a professional in the area.

[Courtney Milan]

You'll have to talk to a tax professional. Think of it this way: with $16,000 on the line, paying a few hundred to make sure you've done your best is worth it!

As for the rest: I have a separate bank account at a separate bank for my tax money. Every time I get a payment, I send 35% of it to the other account. I don't see it. I only use it to pay taxes. I don't ever think of that money as "mine." But at the end of the year, when I do my taxes, it is awesomely beautiful because I get back a huge chunk of money. It's like paying myself a massive refund, and I don't even have to wait for the government to process it!

[smreine]

I've always been a pro-tax weirdo (I like supporting education and roads and other lovely things!) but it was still a bit of a shock to get things together and realize how much of my money isn't my money. I've always had a salaried position where they chop a portion off the top, and this is my first year as someone with a real job, so being responsible for all of it has been a real eye-opener.

So to agree with everyone else:

Estimate your quarterly taxes.
See a professional.
Save very carefully throughout the year.
Close your eyes and think of England.
See a professional.

[drmamalove]

I think I will be finding an accountant to see what I missed or need to change. I think I will get one right away and then just wait to send it in.
 I think I will also be  doing some quarterly estimates to lessen the pain.  Luckily I still have a few months still to deal with it and I have the money to pay it.

Yes, I too will have about 35% in taxes that I will owe.  

I think the more you make the higher the percentage you owe and I don't feel that is fair. It' like saying to the kids in the class that have the A+  You really have too many points and that's not fair let's take their points and divide it among those who are getting D's and F's. so we'll all be the same.  So, now tell me who is going to work harder...what's the point? It will only be taken away. If I dint work hard it doesn't matter the A+ kids will give us theirs.

But, I guess I am just in a bad mood about it all. Sorry.  I just think we need a flat tax on sales *sigh*  I guess I have very conservative views and believe it's the church that needs to determine the needs of it's community because it is there we would know who was receiving our wealth and how it would be distributed.

I am never thrilled when I look at my husbands paycheck widdled away by taxes. It is easier financially watching it go month to month though.

 AH, but that's my own political views and this isn't about whether or not we need taxes or how they take money.  It's how can I keep as much as I can  

I guess I will be asking around for an account I can see right away and start making quarterly payments and I am thrilled that this is a problem I am having.  It has helped many people financially in my family and at church.  When my moms fridge went I was able to buy her that fridge and when her washer went I was there again. I was able to help my brother turn his electricity back on....It has been a blessing and I thank God every day...see I grew up poor we had no money.  It was the church that was there for me.

[drmamalove]

Sorry if I stepped on any ones toes. We all have different beliefs in the tax system etc... I am just crabby right now.   I think I need a drink