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2020 taxes - how did you fare?

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    2020 taxes - how did you fare?

    I don't think we have a 2020 tax thread. If we do, my apologies.

    We just got our return back. As expected, we made out well. Our investment income was down in 2020. At the end of December, I made a sale to harvest a loss. They added a $300 charitable deduction. Between all of that, we went from owing the Fed $946 last year to getting a refund of $518 this year. Our state return was even better. Last year we got a refund of $2,403. This year we're getting back $3,065.

    Our effective tax rate was about the same: 15.88% for 2020 vs 15.78% for 2019.

    After paying the accountant, the rest of the refund will be going into savings.
    Steve

    * Despite the high cost of living, it remains very popular.
    * Why should I pay for my daughter's education when she already knows everything?
    * There are no shortcuts to anywhere worth going.

    #2
    Our taxes dropped precipitously this year, and I can only attribute it to 3 main reasons: (1) our AGI dropping by $40k (following my wife getting medically retired from the military), while (2) our itemized deductions (mostly charity, mortgage interest & SALT) remained almost identical. Besides obviously reducing our taxes due because of the lower income & steady deductions, (3) that 2020 AGI drop qualified us for the full COVID stimulus amounts, vs. the reduced stimulus payments we received previously based on our 2019 AGI.

    The shock is seeing that our "total tax" went from $15,500 last year to only $6,800 this year! I haven't figured out why it would drop by almost 60%.... And that's even before the stimulus stuff gets factored in.

    So we're getting a $6,238 refund this year ($1600 of that is from refunded stimulus, as mentioned above)... 2020 AGI was $126k, effective tax rate of just 5.4%. Last year, we had $166k AGI, 8.5% effective tax rate. I won't really complain about paying shockingly little in taxes -- the massive refund is likely headed straight to savings... But I'm definitely confused.
    "Praestantia per minutus" ... "Acta non verba"

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      #3
      I am getting a refund of $1100. Dang it. I though I was going to owe $500. I paid a couple of estimates because I knew I was going to be off. I usually underwithhold and then I make an end of the year payment in December based on our paychecks. Turns out I harvested a lot more losses in March than I thought so I actually had a loss. Effective rate was ~24%. No complaining, i'd rather make more and pay more.

      Kork it's always better to have 1 wage earner and spouse than 2 evenly balanced earners. You get a better deal. The $40k in income would have been taxed at 22% so $8800 looks about right. $8800 + $6800 = $15600. Every dollar at the top is taxed at the highest bracket and MFJ with 2 kids puts you at $25k tax free then 12% up to $80k plus the child tax credit of $2k per kid. You are at a sweet spot of earning a good income and taxes aren't bad.
      LivingAlmostLarge Blog

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        #4
        Originally posted by LivingAlmostLarge View Post
        Kork it's always better to have 1 wage earner and spouse than 2 evenly balanced earners. You get a better deal. The $40k in income would have been taxed at 22% so $8800 looks about right. $8800 + $6800 = $15600. Every dollar at the top is taxed at the highest bracket and MFJ with 2 kids puts you at $25k tax free then 12% up to $80k plus the child tax credit of $2k per kid. You are at a sweet spot of earning a good income and taxes aren't bad.
        Wow, I guess no reason to be surprised at all... Thanks for explaining it, that actually makes alot of sense. With DK3 due in the next 2 weeks, I suppose that will help our taxes even further...

        But how does 2 evenly earning spouses work out to be worse than an earner+non-earning spouse with the same total income? That seems nonsensical.

        ​​​​I normally aim to have our tax return as close to zero as possible.... One year my refund was less than $100! But with deployments, kids, moving, promotions, and so on over the last few years, it seems everything is always changing so it's impossible to get a good read on forecasting my taxes accurately. Kinda bothersome, and right now, I would normally say that with a $6k+ tax refund, I need to dramatically reduce my withholding for the rest of this year.... But so much seems "different/abnormal" (especially the COVID stimulus) that I'm not sure I trust it enough to make any radical changes. Ugh, taxes.....
        "Praestantia per minutus" ... "Acta non verba"

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          #5
          We just received our return from our preparer. We had a fair amount going on in 2020 - with our regular careers, unemployment income for DW during summer furlough, a final retention payment for me related to sale of business, and cap gains/dividends related to brokerage account. Outcome was effective Federal tax rate of 18.25% and effective State tax rate of 6.4%.

          When I received the final retention payment from the sale of the business (roughly 30k) in early 2020, I sent 20k to Feds and 10k to the State as tax prepayment. Based on all of this, we were due to receive decent sized refunds in 2020 from both Federal and State, but elected to leave these $$ with the Feds and the State to eliminate the need for quarterly payments in 2021.

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            #6
            Got everything sorted out today and sent to our CPA.
            Had (13) different sources of income in 2020, so it gets interesting keeping track of things. Used to do quarterly's, but last couple years we've been simply settling up any under / over payment at year end, then prepaying the entire upcoming year's anticipated taxes based on anticipated income for the upcoming year. All income we receive comes in pre-tax, so it all has to be taxed.

            Should know in a couple weeks where we stand.

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              #7
              We got back $1600 from federal, and owed around $150 for state. Just received the $1600 direct deposited last friday.

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                #8
                I have to say also I tend to wait. Mostly because I find the 1099 brokerage statements come out late and because sometimes they get corrected annoyingly which if i had filed earlier would be annoying to amend. So I tend to wait to file until April 1stish. Also I usually owe. I'm super surprised to get a refund
                LivingAlmostLarge Blog

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                  #9
                  2300 refund fed
                  180 owed to state

                  mailed fed priority mail ($8) on 13-Feb. still hasn’t been delivered.

                  Comment


                    #10
                    Originally posted by Jluke View Post
                    2300 refund fed
                    180 owed to state

                    mailed fed priority mail ($8) on 13-Feb. still hasn’t been delivered.
                    We haven't mailed our taxes for a very, very long time. Why don't you e-file?
                    Steve

                    * Despite the high cost of living, it remains very popular.
                    * Why should I pay for my daughter's education when she already knows everything?
                    * There are no shortcuts to anywhere worth going.

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                      #11
                      Originally posted by disneysteve View Post

                      We haven't mailed our taxes for a very, very long time. Why don't you e-file?
                      Don’t want to pay for turbo tax. I use it to check my math but still fill out the forms.

                      i e-file the state since I’ve had to do taxes (over 20 years)

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                        #12
                        Originally posted by Jluke View Post

                        Don’t want to pay for turbo tax.
                        Ah. I didn't realize you had to pay to e-file. We've always had an accountant (my father was an accountant, then my cousin did it for years) who e-filed for us.
                        Steve

                        * Despite the high cost of living, it remains very popular.
                        * Why should I pay for my daughter's education when she already knows everything?
                        * There are no shortcuts to anywhere worth going.

                        Comment


                          #13
                          Originally posted by disneysteve View Post

                          Ah. I didn't realize you had to pay to e-file. We've always had an accountant (my father was an accountant, then my cousin did it for years) who e-filed for us.
                          Yeah, it is around $70 or so through TT.

                          IRS does offer free e-file but you need to meet certain income limits ($70,000 or so?).

                          I did pay to have my taxes done by a professional a few years ago. I think that was $150

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                            #14
                            Originally posted by Jluke View Post

                            Yeah, it is around $70 or so through TT.

                            IRS does offer free e-file but you need to meet certain income limits ($70,000 or so?).

                            I did pay to have my taxes done by a professional a few years ago. I think that was $150
                            Credit karma is free. No income limits. That's what we used. Very user friendly. But, paper filing works too. Some people do not trust putting personal info over the internet.

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                              #15
                              Originally posted by rennigade View Post

                              Credit karma is free. No income limits. That's what we used. Very user friendly. But, paper filing works too. Some people do not trust putting personal info over the internet.
                              Thanks. I know last year after I finished those taxes I said I would look to e-file for this year. Just fell into old habits and forgot to find a free option. Curious to see how long this process takes. Not off to a good start if the tracking information can be trusted.

                              maybe next year.

                              welcome back.

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