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The tax system here (usa) is an absolute joke. I owed $5k this year and I literally did nothing different except receive a small 5% raise last year. I have the

by swozey 2y ago

The tax system here (usa) is an absolute joke. I owed $5k this year and I literally did nothing different except receive a small 5% raise last year. I have the most basic taxes you can, single, no kids, no house. Literally just a salary paycheck every 2 weeks. Had no idea I would owe anything, much less that much money until I filed 2 weeks prior to our tax date in April and you're expected to pay everything you owe to them on that date. I sold a house in 2019, I walked away with only about $15k profit after paying everyone. Bought the house for $335, sold for $370ish. I think my principal was around $310k at the sale. I got a letter in 2022 that I owed the IRS something like $150k or so, some shocking amount of money. Freaked me the hell out. I had to dig out all of my paperwork from the sale and send it to them. All of it but, I forget, maybe $100-1k was dropped. I have no idea what their deal with that was. I had a mortgage, paid the mortgage to my mortgage broker, and when I sold it paid the mortgage off to that mortgage broker. Don't they handle that? I don't know, it was my first house sale. I'm 40, I've never had the IRS annoy the hell out of me until the last 5 years and now I get a letter from them and my heart stops.. Like, what is it now, masters of my w2? Where I have erred today? It feels like they're practically targeting me at this point. I get letters from them and wonder if they're even legitimate so I call in to verify. When I go to the irs.gov site that tells you what you owe, it doesn't even match what any of my letters say. Right now it says I owe money from I think 2016 that was sent to collections and I've never received a letter for that. Collections! For my taxes? That you pull out of my paycheck?? I don't have ANYTHING about that on my credit report. I also have no way to pay it because it's "In collections." Seeing all of the rich assholes skate by with tax evasion and all of the loop hole work they do, then knowing they're on my ass when I'm just a dude getting a salary just pisses me off so much.

junar 2y ago
Default federal income tax withholding on bonuses is 22%. If your marginal federal tax rate is higher than that, then you underwithheld, meaning you owe more in taxes than you paid over the year. https://pburgoscpa.com/managing-your-bonus-in-nyc-a-high-income-earners-guide-to-avoiding-surprise-tax-bills/ https://pburgoscpa.com/managing-your-bonus-in-nyc-a-high-inc... For your home sale, the person responsible for closing the transaction files Form 1099-S with the IRS, reporting the sale amount (which they're responsible for) but not how much you paid for it (because you're responsible for that). You should have gotten a copy of the 1099-S, which was your clue that you needed to report it on your return.
gamblor956 2y ago
Millions of people manage to properly report the sale of their home every year. Don't blame the IRS for this mistake; this was entirely on you.
- swozey 2y ago
  I had literally nothing to do with the reporting of my house sale. The mortgage broker does that. Keep going though, wise one.
deleted 2y ago
[deleted]
phone8675309 2y ago
Your company fucked up by not taking withholding from the bonus.
- swozey 2y ago
  I do get a 20% bonus at this company and I think it is attributed to that. It was my first time getting that bonus. What do I even do here? Talk to HR? I don't think I can do anything and just suck it up and pay it and expect it next year? I dunno.
  - phone8675309 2y ago
    Talk to HR and ask to review your W-4. Use your W-2 and this calculator from the IRS[1] - ensure that your W-2 includes the bonus you received (I would imagine it would since you got taxed on it). That should give you the values you need to have in your W-2 to avoid a massive tax bill at the end of the year. You can also set a additional flat amount of withholding per paycheck. You get any overpayment back as a refund. [1] https://www.irs.gov/individuals/tax-withholding-estimator https://www.irs.gov/individuals/tax-withholding-estimator
  - tekla 2y ago
    Yes, you got a big bonus and it wasn't taxed when you got it. I don't know why you would be confused as to why your liability went up?
    - swozey 2y ago
      It absolutely was taxed. I also have never received a paycheck that wasn't pre-taxed. It was something like a $30k bonus and I received about $17kish of it. Be more condescending though, that's helpful, wise one. I didn't say I KNEW it was the issue, I said it was potentially that. The IRS doesn't say "Hey you messed up here, fix this, that's the problem." They just send you a bill, which sucks. I had NO information on my $150k house sale tax and had NO idea what information they needed to rectify it.
  - whimsicalism 2y ago
frutiger 2y ago
> I owed $5k this year and I literally did nothing different except receive a small 5% raise last year. This is a common gripe I hear from US tax filers, and I fall into the same psychological trap myself. After all, it always feels bad to have to pay a 4 or 5 figure sum to anyone. Instead, you should see this as a benefit -- you had the opportunity to extract gains from the stock market (or other investment) on money you rightfully owed to the government; they only came to collect it at the end of the year instead of with each paycheck. Conversely, a tax refund should be seen as a disadvantage, as the government withheld more money from you than it was entitled to.
- lesuorac 2y ago
  I don't remember what all the limits are but the first time you underpay beyond a certain amount the government looks the other way but the second+ time you have to pay penalties. Penalties for a situation wholly in control of the government. They wrote the withholding tables your employer is abiding by to withhold _not enough_ to avoid you having a penalty at the end of the year. Although I suspect this only matters to FANG where the changes to withholding from the Tax Cuts & Jobs Act meant you had to modify the supplemental withholding rates so you wouldn't get penalized.

by swozey 2y ago

junar 2y ago

Default federal income tax withholding on bonuses is 22%. If your marginal federal tax rate is higher than that, then you underwithheld, meaning you owe more in taxes than you paid over the year. https://pburgoscpa.com/managing-your-bonus-in-nyc-a-high-income-earners-guide-to-avoiding-surprise-tax-bills/ https://pburgoscpa.com/managing-your-bonus-in-nyc-a-high-inc... For your home sale, the person responsible for closing the transaction files Form 1099-S with the IRS, reporting the sale amount (which they're responsible for) but not how much you paid for it (because you're responsible for that). You should have gotten a copy of the 1099-S, which was your clue that you needed to report it on your return.

gamblor956 2y ago

Millions of people manage to properly report the sale of their home every year. Don't blame the IRS for this mistake; this was entirely on you.

swozey 2y ago
I had literally nothing to do with the reporting of my house sale. The mortgage broker does that. Keep going though, wise one.

deleted 2y ago

[deleted]

phone8675309 2y ago

Your company fucked up by not taking withholding from the bonus.

swozey 2y ago
I do get a 20% bonus at this company and I think it is attributed to that. It was my first time getting that bonus. What do I even do here? Talk to HR? I don't think I can do anything and just suck it up and pay it and expect it next year? I dunno.
- phone8675309 2y ago
  Talk to HR and ask to review your W-4. Use your W-2 and this calculator from the IRS[1] - ensure that your W-2 includes the bonus you received (I would imagine it would since you got taxed on it). That should give you the values you need to have in your W-2 to avoid a massive tax bill at the end of the year. You can also set a additional flat amount of withholding per paycheck. You get any overpayment back as a refund. [1] https://www.irs.gov/individuals/tax-withholding-estimator https://www.irs.gov/individuals/tax-withholding-estimator
- tekla 2y ago
  Yes, you got a big bonus and it wasn't taxed when you got it. I don't know why you would be confused as to why your liability went up?
  - swozey 2y ago
    It absolutely was taxed. I also have never received a paycheck that wasn't pre-taxed. It was something like a $30k bonus and I received about $17kish of it. Be more condescending though, that's helpful, wise one. I didn't say I KNEW it was the issue, I said it was potentially that. The IRS doesn't say "Hey you messed up here, fix this, that's the problem." They just send you a bill, which sucks. I had NO information on my $150k house sale tax and had NO idea what information they needed to rectify it.
- whimsicalism 2y ago

frutiger 2y ago

> I owed $5k this year and I literally did nothing different except receive a small 5% raise last year. This is a common gripe I hear from US tax filers, and I fall into the same psychological trap myself. After all, it always feels bad to have to pay a 4 or 5 figure sum to anyone. Instead, you should see this as a benefit -- you had the opportunity to extract gains from the stock market (or other investment) on money you rightfully owed to the government; they only came to collect it at the end of the year instead of with each paycheck. Conversely, a tax refund should be seen as a disadvantage, as the government withheld more money from you than it was entitled to.

lesuorac 2y ago
I don't remember what all the limits are but the first time you underpay beyond a certain amount the government looks the other way but the second+ time you have to pay penalties. Penalties for a situation wholly in control of the government. They wrote the withholding tables your employer is abiding by to withhold _not enough_ to avoid you having a penalty at the end of the year. Although I suspect this only matters to FANG where the changes to withholding from the Tax Cuts & Jobs Act meant you had to modify the supplemental withholding rates so you wouldn't get penalized.