Did anything surprise you in your 2016 taxes?

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unclescrooge
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Re: Did anything surprise you in your 2016 taxes?

Post by unclescrooge » Tue Apr 18, 2017 10:14 pm

dodecahedron wrote:
unclescrooge wrote:
Of course, the state tax refund will be taxed next year but luckily household income will be lower due to wife not working for 2 months for maternity leave, and I'll get a huge deduction for installing solar.

Basically, my refund is paying for a new roof + solar panels. And these are providing a large deduction next year. :mrgreen:


Small but important technical point: what you get for solar is NOT a tax deduction, it is a tax credit.

A tax credit is generally much more valuable than a tax deduction. A tax deduction of $X reduces your taxable income by $X and reduces your tax liability by some (less than 100%) percentage of $X. A tax credit of $X reduces your tax liability by $X. (Even better, the solar tax credit can be carried forward if you do not have enough tax liability to use it all in one year. By contrast, most tax deductions can't be carried forward if they can't be used in the current year. There are some noteworthy exceptions to this last rule, e.g., excess charitable deductions can be carried forward.)


Ah yes! Even better! :beer

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badbreath
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Re: Did anything surprise you in your 2016 taxes?

Post by badbreath » Tue Apr 18, 2017 11:01 pm

I wound up getting a $300 credit from the federal but had to pay $300 state so it was a wash. Not bad at even.
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mpsz
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Re: Did anything surprise you in your 2016 taxes?

Post by mpsz » Tue Apr 18, 2017 11:24 pm

I was surprised that the last $23 I earned cost me over $40 in state income taxes. A bunch of credits and deductions phased out at the same time.

Miriam2
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Re: Did anything surprise you in your 2016 taxes?

Post by Miriam2 » Tue Apr 18, 2017 11:48 pm

My son fired me as his tax preparer :mrgreen:

I did his taxes by hand, not difficult, then I do them with my son so he learns.

The nice surprise was that since he earns only $30,000 a year but maxes his 401k and his HSA, his earned income is low, his taxable income was zero and taxes owed were zero. He got back all federal income tax withheld (no state tax). He treated his friends to burritos and beer 8-)

Then the IRS wrote him a very nice letter telling him he qualified for the Earned Income Credit (EIC) on line 66a - why didn't he take it? He glared at me, filled out the form the nice IRS sent him and the nice IRS will pay him $299.

I saw the EIC when preparing his form, but never thought he could possibly receive any money from it since his taxable income on line 43 was zero and his taxes owed were zero, so I never actually read the directions carefully and missed it :oops:

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Misenplace
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Re: Did anything surprise you in your 2016 taxes?

Post by Misenplace » Wed Apr 19, 2017 12:52 am

I learned about the kiddie tax- the hard way. Basically, if you get kicked into it (your kid receives more than '$2100 in unearned income), it puts not only their unearned income into your tax bracket, but also a portion of their earned income into your tax bracket. Not much of a problem if they have unearned income (that's why they have the kiddie tax), but an unwelcome surprise if they were working hard and had substantial earned income that is now taxed at my 39.6% rate. I'll pay my child back for the extra taxes on their hard earned money since it was my mistake, and I won't make that mistake again!

Hopefully this will help someone else since the kiddie tax is not very clear before you work through the multiple worksheets to learn what I did.
Last edited by Misenplace on Mon May 22, 2017 12:00 am, edited 1 time in total.

TigerNest
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Re: Did anything surprise you in your 2016 taxes?

Post by TigerNest » Wed Apr 19, 2017 1:58 am

We had a baby last year, but we did not get the famous tax break at all -- the individual deduction was completely phased out!

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triceratop
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Re: Did anything surprise you in your 2016 taxes?

Post by triceratop » Wed Apr 19, 2017 2:11 am

Miriam2 wrote:My son fired me as his tax preparer :mrgreen:

I did his taxes by hand, not difficult, then I do them with my son so he learns.

The nice surprise was that since he earns only $30,000 a year but maxes his 401k and his HSA, his earned income is low, his taxable income was zero and taxes owed were zero. He got back all federal income tax withheld (no state tax). He treated his friends to burritos and beer 8-)

Then the IRS wrote him a very nice letter telling him he qualified for the Earned Income Credit (EIC) on line 66a - why didn't he take it? He glared at me, filled out the form the nice IRS sent him and the nice IRS will pay him $299.

I saw the EIC when preparing his form, but never thought he could possibly receive any money from it since his taxable income on line 43 was zero and his taxes owed were zero, so I never actually read the directions carefully and missed it :oops:


Useful to read the distinction between Refundable and Non-refundable tax credits. At the least you can discuss taxes with your son now; I find it great dinner conversation with my parents / siblings. They think I am nuts. :)
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Re: Did anything surprise you in your 2016 taxes?

Post by denovo » Wed Apr 19, 2017 2:20 am

Running depreciation and figuring out different safe harbors is a real pain in the you know what.
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corner559
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Re: Did anything surprise you in your 2016 taxes?

Post by corner559 » Wed Apr 19, 2017 6:05 am

Realizing that royalty income on my 1099-MISC doesn't count as earned income.

tibbitts
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Re: Did anything surprise you in your 2016 taxes?

Post by tibbitts » Wed Apr 19, 2017 6:41 am

I was surprised that in my state apparently the first $10k converted from Traditional to Roth isn't taxed for state income. Or at least that's what TaxAct calculated.

I was surprised I couldn't e-file an amended federal return (I'd never tried), and that my state had eliminated its amended return form a few years ago in favor of just some additions to the regular return.

I was surprised at the zip code for the Austin, TX IRS office.

I was surprised I couldn't e-file a very simple 1040A for my deceased relative. The relative was deceased last year too and the e-file was accepted. The IRS refused the e-file time and time again saying that neither my PIN from last year or the AGI from last year didn't match (even after I requested a transcript from the IRS and had the PIN from the e-file last year.) I finally USmailed it.

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DaleMaley
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Re: Did anything surprise you in your 2016 taxes?

Post by DaleMaley » Wed Apr 19, 2017 7:16 am

I U.S. mailed in my 2016 tax return in early March.

This week, I got a notice saying I owed the IRS $2800 :(

I studied the IRS notice, and figured out the $2800 was the amount I said I wanted from my 2015 tax refund to be applied to 2016 taxes. It never got applied, so that is why I got the $2800 tax notice.

I called the IRS. After 20 minutes on hold, I got to talk to a person. He checked the IRS system, and my 2015 tax return (filed by US mail) has never been entered into their computer system!! He suggested the best remedy was to file my 2015 tax return again, which I did by US mail this week.

So either the 2015 tax return got lost in the mail, or when the IRS got it and saw the net was $0 owed, they decided to not enter it into their system??

Hopefully, this 2nd filing of my 2015 tax return will resolve this issue.
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Re: Did anything surprise you in your 2016 taxes?

Post by jebmke » Wed Apr 19, 2017 7:22 am

DaleMaley wrote:So either the 2015 tax return got lost in the mail, or when the IRS got it and saw the net was $0 owed, they decided to not enter it into their system??

Perhaps, but more likely that it just got randomly skipped. I think paper returns are all scanned. I would be surprised if a person looks at the return when it first arrives.
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mt
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Re: Did anything surprise you in your 2016 taxes?

Post by mt » Wed Apr 19, 2017 11:30 am

I am surprise at how my exemptions are phasing out.
2012 $19000
2013 $11310
2014 $8690
2015 $3200
2016 $810

clown
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Re: Did anything surprise you in your 2016 taxes?

Post by clown » Wed Apr 19, 2017 11:40 am

We are in our 70s. Depending on medical expenses, our taxable income is $4,000 to $7',000. We do not claim any special credits (e.g. renters credit). Why do we have a zero federal taxliability? The tax table seems to say we should have 10% tax.

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Re: Did anything surprise you in your 2016 taxes?

Post by flamesabers » Wed Apr 19, 2017 11:49 am

clown wrote:We are in our 70s. Depending on medical expenses, our taxable income is $4,000 to $7',000. We do not claim any special credits (e.g. renters credit). Why do we have a zero federal taxliability? The tax table seems to say we should have 10% tax.


Is the $4k-$7k before or after you factor in your deductions and exemptions?

clown
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Re: Did anything surprise you in your 2016 taxes?

Post by clown » Wed Apr 19, 2017 11:56 am

After all deductions and exemptions. Sorry I wasn't clear in earlier post.

goldendad
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Re: Did anything surprise you in your 2016 taxes?

Post by goldendad » Wed Apr 19, 2017 12:17 pm

The limitation of deductions and exemptions at higher income levels.

Miriam2
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Re: Did anything surprise you in your 2016 taxes?

Post by Miriam2 » Wed Apr 19, 2017 1:56 pm

triceratop wrote:Useful to read the distinction between Refundable and Non-refundable tax credits. At the least you can discuss taxes with your son now; I find it great dinner conversation with my parents / siblings. They think I am nuts. :)

lol! Discussing taxes at the dinner table with the family is a sure fire way to get them out of the house and on their own :D

Thank you for the link. I still don't understand it, but who am I to question the wisdom of the IRS :wink:

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Re: Did anything surprise you in your 2016 taxes?

Post by Teague » Wed Apr 19, 2017 3:54 pm

Yes, this was the first year I owed a significant amount. Here's why, I now realize:

- I refinanced the house, and had paid less deductible mortgage interest. Also, this led me to bundle deductions alternate years, and this filing was an off year (fewer deductions this year, but increased deductions prior year and next year.)

-I increased my contributions to my 401k type plan, so less tax was withheld.

So, instead of just breaking even like in the past, I had to pay $2500 with my return this year. Also a small penalty, and will have to file quarterly estimated this coming year. I've since adjusted my W-4.
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Re: Did anything surprise you in your 2016 taxes?

Post by Traveler » Wed Apr 19, 2017 4:56 pm

I was surprised how close I came to breaking even with the feds. I rec'd a $31 refund.

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Re: Did anything surprise you in your 2016 taxes?

Post by learning_head » Wed Apr 19, 2017 5:56 pm

Head of Household status apparently has no advantage over Single status once both reach AMT level

slowmoney
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Re: Did anything surprise you in your 2016 taxes?

Post by slowmoney » Wed Apr 19, 2017 7:37 pm

My surprise:

The CPA firm only charged $160.00 to file two state returns and federal. Usually, I use Turbo tax but I quit my S-corp, had moving expenses, received employer moving expenses, college expenses, sold/bought homes and had some rollovers. I had a daunting feeling to complete my taxes with Turbo tax. IMO, Turbo tax sucks when it comes to state returns.

The CPA firm took a total of 2 hours. The initial visit, follow up paperwork and pickup, 2 hours. I usually waste a couple of hours on Saturday and Sunday with Turbo tax. I am sure Turbo tax would be close to the $160.00 with a lot more wasted time.

Our returns will be much simpler next year, but I am shocked that I am actually thinking about just going back to the CPA firm again due to low cost, ease and pleasant experience. :D

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Re: Did anything surprise you in your 2016 taxes?

Post by Bfwolf » Wed Apr 19, 2017 7:43 pm

Like the OP, I had lower income than in years past and also was surprised to see I got the retirement saver's tax credit. I was also surprised to see I would not receive the majority of my foreign tax credit. I was able to carry back most of it to 2015 but in future years I think I will just lose most of it as I don't foresee a high enough earning year in my future where I'll be able to carry it forward. A cautionary tale about carrying too many int'l stocks in your taxable account.

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Re: Did anything surprise you in your 2016 taxes?

Post by Tamarind » Wed Apr 19, 2017 7:46 pm

jebmke wrote:
DaleMaley wrote:So either the 2015 tax return got lost in the mail, or when the IRS got it and saw the net was $0 owed, they decided to not enter it into their system??

Perhaps, but more likely that it just got randomly skipped. I think paper returns are all scanned. I would be surprised if a person looks at the return when it first arrives.


Sounds like another reason to prefer efiling.

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Re: Did anything surprise you in your 2016 taxes?

Post by Spedward » Wed Apr 19, 2017 8:27 pm

I got surprised on the state side this year.

I generally have to file in 5 or 6 states. Pain in the but but my employer grosses up the difference in takes so it generally has no impact other than having to file a number of returns. I typically come out ahead because of the state credit provided in IL.

This year however I spent a lot of time in Omaha NE. Man, NE nails nonresidences. Most states just tax your state source income, but NE apportions your income so they effectively pull in non-Nebraska income and subject it to tax. The additional tax was overall small in the grand scam of things but man did it piss me off.

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Re: Did anything surprise you in your 2016 taxes?

Post by mainiac » Wed Apr 19, 2017 8:54 pm

One of my siblings bought two new cars last year. I didn't think too much about it. Come tax time, I find out that my sibling took extra retirement withdrawals to pay for the cars. All of this retirement withdrawal was taxed at 25% (no early withdrawal penalty thankfully). For the extra taxes they paid, simply because they didn't want any car payments, they could have bought a third car!!

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Re: Did anything surprise you in your 2016 taxes?

Post by grabiner » Thu Apr 20, 2017 9:04 pm

Spedward wrote:This year however I spent a lot of time in Omaha NE. Man, NE nails nonresidences. Most states just tax your state source income, but NE apportions your income so they effectively pull in non-Nebraska income and subject it to tax. The additional tax was overall small in the grand scam of things but man did it piss me off.


Most states work this way for non-residents. If your total income is $100K, and you earn $20K in state X, then you compute the tax on $100K, and pay 20% of that amount. Thus you are only paying tax on the $20K earned in state X, but you are paying it at the rate for someone earning $100K. And I just checked the NE form, and that is what NE does.
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ClevrChico
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Re: Did anything surprise you in your 2016 taxes?

Post by ClevrChico » Thu Apr 20, 2017 9:11 pm

How annoying it is to upgrade one's Vanguard account mid-year to "brokerage format" and have double the 1099 paperwork to process.

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Re: Did anything surprise you in your 2016 taxes?

Post by TBillT » Fri Apr 21, 2017 9:22 am

Found out one account we had at Fidelity (small Fidelity annuity) does not seem to be captured when you download the Fidelity tax info, and we also did not seem to have hard copy 1099-R this year. I caught it, but this made me wonder about prior years, and now I have to do a 2014 correction.

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Re: Did anything surprise you in your 2016 taxes?

Post by stlutz » Fri Apr 21, 2017 7:17 pm

This was the first year I had to file a form 1116. What suprised me was the degree to which you have to put a whole bunch of numbers on the form that had no impact on the credit.

Seems like they need to bump up the threshold at which you need to file the form.

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Re: Did anything surprise you in your 2016 taxes?

Post by grabiner » Fri Apr 21, 2017 9:11 pm

stlutz wrote:This was the first year I had to file a form 1116. What suprised me was the degree to which you have to put a whole bunch of numbers on the form that had no impact on the credit.

Seems like they need to bump up the threshold at which you need to file the form.


The reason the numbers have no effect is that your investment income is taxed at a relatively low rate by the foreign countries; your maximum allowed credit is probably twice the tax paid, so it doesn't matter whether the correct ratio is 1.9 or 2.1. If you worked or owned a rental property in a foreign country with a high income tax rate, those numbers would start to matter.
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Re: Did anything surprise you in your 2016 taxes?

Post by Wings5 » Fri Apr 21, 2017 9:15 pm

I work for Uncle Sam and a Fortune 500. My social security taxes withheld exceeded the maximum and I did not catch it. It had never been an issue before, so now I have to refile to get a few hundred dollars back.

Started doing my own taxes three years ago by following the instructions. Just got pretty busy this year and didn't pay super close attention.

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Re: Did anything surprise you in your 2016 taxes?

Post by inbox788 » Sat Apr 22, 2017 10:50 am

stlutz wrote:This was the first year I had to file a form 1116. What suprised me was the degree to which you have to put a whole bunch of numbers on the form that had no impact on the credit.

Seems like they need to bump up the threshold at which you need to file the form.


Dammed if you do, dammed if you don't!

I've found a number of programs where the vast majority of participants are basically spinning their wheels, so only a few benefit. Part of the requirement is to avoid fraud, waste and abuse, but ironically, the process itself is wasteful. I'm guessing they're collecting the information for disclosure and possible future use as well as just collecting data.

I thought it was more tax efficient to put more international holdings in taxable to optimize this benefit, but after seeing a negligible effect, and reading about some phaseout I don't quite understand, I'm pretty much giving up for now and ignoring it. I'm with the tax diversification crowd now.

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FWIW, I've curtailed activity that might generate tax documentation requirements. I've closed accounts that were generating 1099-INT for as little as $12, and I'm now grateful for a few accounts that don't generate interest. It's actually slowly working.

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Re: Did anything surprise you in your 2016 taxes?

Post by DaleMaley » Mon May 22, 2017 8:44 am

DaleMaley wrote:I U.S. mailed in my 2016 tax return in early March.

This week, I got a notice saying I owed the IRS $2800 :(

I studied the IRS notice, and figured out the $2800 was the amount I said I wanted from my 2015 tax refund to be applied to 2016 taxes. It never got applied, so that is why I got the $2800 tax notice.

I called the IRS. After 20 minutes on hold, I got to talk to a person. He checked the IRS system, and my 2015 tax return (filed by US mail) has never been entered into their computer system!! He suggested the best remedy was to file my 2015 tax return again, which I did by US mail this week.

So either the 2015 tax return got lost in the mail, or when the IRS got it and saw the net was $0 owed, they decided to not enter it into their system??

Hopefully, this 2nd filing of my 2015 tax return will resolve this issue.


I got the 2nd notice last week that I still owed the money.

I called the IRS today, and good news!!! They received and inputted my 2015 return into their system, and my account shows $0 due :) :D Hold time today was about 20 minutes.
Most investors, both institutional and individual, will find that the best way to own common stocks is through an index fund that charges minimal fees. – Warren Buffett

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