2018 Tax Return

[Like2Plan]

The IRS lowered the penalty free withholding amount to 80% for 2018 taxes in a bulletin just issued 22 March:

https://www.irs.gov/newsroom/irs-expands-penalty-waiver-for-those-whose-tax-withholding-and-estimated-tax-payments-fell-short-in-2018-key-threshold-lowered-to-80-percent

According to the link, if you already filed and had to pay a penalty (but met the new criteria), you can file a Form 843, Claim for Refund and Request for Abatement and include the statement “80% Waiver of estimated tax penalty” on Line 7. This form cannot be filed electronically.

[disneysteve]

The IRS lowered the penalty free withholding amount to 80% for 2018 taxes in a bulletin just issued 22 March:

While it’s nice that they did that, it sucks that the government couldn’t have their act together in time for the start of tax filing season. How many millions of people have already filed and paid the penalty and will have no idea that the rules have changed so late in the game? Unless you used a CPA, you wouldn’t have a clue. The IRS should automatically refund all of that money, not expect people to jump through hoops to get it.

[Like2Plan]

While it’s nice that they did that, it sucks that the government couldn’t have their act together in time for the start of tax filing season. How many millions of people have already filed and paid the penalty and will have no idea that the rules have changed so late in the game? Unless you used a CPA, you wouldn’t have a clue. The IRS should automatically refund all of that money, not expect people to jump through hoops to get it.

I believe I would be more acutely aware of paying the penalty if I filed myself as opposed to using a CPA. That is like adding insult to injury which would be very upsetting. But, I agree with you that the penalty should be automatically refunded.

[disneysteve]

I believe I would be more acutely aware of paying the penalty if I filed myself as opposed to using a CPA. That is like adding insult to injury which would be very upsetting. But, I agree with you that the penalty should be automatically refunded.

What I meant was that if you (generic you) filed on your own, like with TurboTax or something, once you send in your return, I doubt you keep tracking tax law changes that might retroactively apply to you. At least if you used a pro, they would be aware of the changes and notify their clients. It's really sleazy of the IRS to change the rules with just days left until the filing deadline and expect millions of people to know that and go through the process of filing for the refund.

[disneysteve]

Do the online services notify people of stuff like this? I've never used one so have no idea.

[LivingAlmostLarge]

I got a ~$4500 refund. We made about $10k less (loss money on stocks) but we paid about $25k less taxes. Last year we were limited on our itemizations and we got hit with AMT. I was really surprised. First time in years we got a refund. I have to say doing taxes I see the people making more money getting the biggest returns or biggest cuts. It's crazy.

[Like2Plan]

Do the online services notify people of stuff like this? I've never used one so have no idea.

That is a good question. I use TurboTax myself, but I always purchase the CD. I don’t register the software because I don’t like getting all the marketing emails they send out. If you haven’t already filed your taxes, you have to check for updates to the software when you start it. But, if you’ve already filed I don’t know.

I wonder how many folks who owe more taxes file early.

[disneysteve]

That is a good question. I use TurboTax myself, but I always purchase the CD. I don’t register the software because I don’t like getting all the marketing emails they send out. If you haven’t already filed your taxes, you have to check for updates to the software when you start it. But, if you’ve already filed I don’t know.

I wouldn't be surprised if a lot of people don't register the software. It just seems to me that very few people would, on their own, seek out tax changes that occur after they've filed.

[corn18]

Figured I should bump up this thread. More of us have probably done our taxes by now so may have numbers to share.

As expected, the Trump tax hike impacted us. For the first time in many years, we owe for our Federal return. It's modest at $453 but we've always gotten a refund so that's a change. The good news is that we are getting a state refund of $2,458 so our net will be $2,095 back. I'm happy with that as I was expecting it to be even worse.

DS, saw a thread on bogleheads that was talking about those who paid more taxes due to the Trump tax cuts. All of them live in states with high taxes. So the $10k SALT limit seems to be a bear for NY, NJ and CA residents. The universal recommendation was to move

[bjl584]

Looks like I owe $2800 Federal and $250 State.

[disneysteve]

DS, saw a thread on bogleheads that was talking about those who paid more taxes due to the Trump tax cuts. All of them live in states with high taxes. So the $10k SALT limit seems to be a bear for NY, NJ and CA residents. The universal recommendation was to move

Don’t let my wife hear that. She’ll be packed and ready to hit Florida by the time I get home from work.

Keep in mind that about 20% of the population lives in those 3 states so the tax hike affects a lot of people.

[corn18]

Don’t let my wife hear that. She’ll be packed and ready to hit Florida by the time I get home from work.

Keep in mind that about 20% of the population lives in those 3 states so the tax hike affects a lot of people.

It was eye opening to see how large an impact it had for a lot of higher earners in those states. Holy crap, they pay a lot of state and property tax. Even on modest incomes. I had dismissed all of the rhetoric early on as whining, but now I understand the real impact. My only question is what do you get for those high taxes vs. a more modest fly over state?

[Like2Plan]

DS, saw a thread on bogleheads that was talking about those who paid more taxes due to the Trump tax cuts. All of them live in states with high taxes. So the $10k SALT limit seems to be a bear for NY, NJ and CA residents. The universal recommendation was to move

I was trying to figure this out. Moving to a state that doesn't have a state income tax would not change the outcome of federal taxes, though, would it? However, it would save the state tax money paid. IIRC, I saw one individual who said they lost $67k in state tax deductions---Wowser! I can't imagine how much income that generates that kind of state income tax--that's Corn territory. . But, also these folks would have been solidly in AMT territory under the old system which also excludes SALT and taxed at a higher tax schedule in 2017.

A lot of times I have seen the state income tax is higher in one state than another, but then the lower income tax state makes up for it in other ways through sales tax or property tax or personal property tax or whatever tax. (It's hard to find the sweet spot in retirement). But, those states that have high income tax and high property tax and I wonder the same thing as corn --what do they get for those high taxes?

[corn18]

Just finished my taxes. My tax rate went from 28.5% if I had filed under the old rules to 25.7% under the new rules. I lost $7,833 in SALT but the lower tax brackets really helped out. I paid $14,704 less in taxes under the new rules. Yeah!

[disneysteve]

My only question is what do you get for those high taxes vs. a more modest fly over state?

I really have no basis to answer that as I've lived my entire adult life in NJ. I grew up in PA but didn't own a home so I don't really know how taxes were relative to what we pay here.