Quote:
Originally Posted by csmith12
Frugal, maybe you're right and I need a better accountant, but I truly believe you highly underestimate the level of ethics I have. I fired my last accountant that "saved" me $$$ by questionably filling out the tax forms. I have no issue paying my part and fair share, however... I highly dislike being taken advantage of. Here is a peek of what is going on with YOUR $$$ as well as everyone else's that posts here.
You get taxed on your gross income at the fed level - deductions (15%-22%)
You get taxed on your gross income at the state level - deductions (around 7%)
You pay taxes on nearly every dollar you spend - sales tax (6%+, 33%+/- on gas and other taxes on top of that for other goods they specifically tax outside of the norm)
You pay school tax on your utilities .3% (around $12 a month)
You might pay city our county taxes depending on where you live (1-2% around $200-$300 bucks)
You pay tax year after year, after year on your car, house and other properties just because you own them.
Local levee's for XYZ schools, parks, museums, ect... ect...
bla bla bla bla bla bla
Trust me, you are in the same boat as me, you only get about 50ish% of you're income, the rest goes to someone else.
So say you get $1000
-18% = $820 (add another 15% for me because I am self employed, yes I know a good chunk of that is SSI, but that don't help my monthly budget none and may be taxable later anyway... :\)
-7% = $750 (that is 7% of $1k not $820)
School tax - $12 = $738
City tax @ 1.5% = $15 - $738 = $723
Property taxes @ $1500 a year for home/auto = $125... $598 left
Levee's $8 = $590
If you spend $590 on goods that are subject to sales tax then - 6% of that too. = $554
Hey, not bad for making $1k right?  |
The way our federal taxes work now is that you pay zero on the first $43 of that one week paycheck, then 10% of the amount between $43 and $222, then 15% of the amount between $222 and $767, then 25% of the amount between $767 and $1,000. A lot of people incorrectly believe that when their income increases into the next tax bracket that the new tax rate applies to all their income, when in fact it only applies to the amount that's in that actual tax bracket. That's why they call them brackets. In your hypothetical $1,000 gross paycheck for a week's worth, the actual FICA owed would be $0 + $17.90 + $81.75 + $58.25 = $157.90. Now, my Windows calculator says that $157.90 is 15.79% of $1,000 not 18%, so this is a good demonstrator of why you need an accountant. Oh, and this tax is after all your deductions that you are allowed to take out of that $1,000 before it even gets to the tax tables in the first place. Heck, all those other state and local taxes you pay are deductible from your income before you calculate your federal taxes. In fact, I think your accountant's fee is also deductible as a business expense. And since you're probably a contractor, you can deduct your mileage driving to and fro at the current rate of .54/mile. If you drive 20 miles round trip that's $10.80 per day, $54/week you can take right off the top before the Feds get their cut. Sweet.
Do you pay sales tax on food? I'm just curious. In my state almost all food is untaxed unless it's a prepared ready to eat type item. Bread, veggies, meats, canned and jarred foods are tax-free. Sandwiches at the deli, takeout food, and all beer and softdrinks are taxed. Our sales tax rate is 8.25%.
Bottom line is you're paying way more than you should in taxes and it's because you've decided to not use an accountant.
Here's last year's IRS guide to deductible expenses, it's 52 pages long:
https://www.irs.gov/pub/irs-pdf/p535.pdf
And here's this year's Circular E which describes the wage bracket system for calculating federal witholding:
https://www.irs.gov/publications/p15...link1000254784
All you're accomplishing by way overpaying taxes is self-flaggelation. Get an accountant, stop making excuses. Ask around for references, look for a CPA, read yelp review, just stop inventing reasons to keep overpaying your taxes.