Taxing Experiences
Mar. 24th, 2013 05:26 pm![[personal profile]](https://www.dreamwidth.org/img/silk/identity/user.png){kind=small}
captainsblogI spent the better part of yesterday, and a good chunk of today, getting our taxes filed. This was promised as the last required step to getting our refi cleared to close- and while that's great news, in another respect, it wasn't.
Bear with the lawyer for a moment. Our tax year is the previous calendar year. For almost all purposes, Auld Lang Syne at midnight on New Years Eve drops an impenetrable wall on things. If you get a paycheck on January 2nd, or write a check for a charitable contribution during your New Years morning hangover, tough on you. Yet, since lawyers are involved in writing this nonsense, there's an important exception: IRS rules allow you to make contributions to retirement accounts for the previous tax year all the way up to the filing date of the return, which is on (or, for odd reasons, sometimes a day or two beyond) April 15th.
It can make a significant dent in your tax bill. Both of us being old farts, we're allowed to each contribute $6,000 to retirement accounts. Doing so before April 15th would cut our 2012 federal tax bill by 40 percent and turn a small state tax bill into a small refund. But we can't- since the money we were gonna use to fund those contributions was coming out of the refi.
We have a couple of options. One: if the money actually comes to us by April 15th, we could amend the returns to take the deductions and claim the savings. The problems with that, though, are twofold. One, we're still not sure if we will get the cash-out on time, and the ever-changing figures on the deal leave it totally to chance whether we'll have that much coming out (the original estimate had us getting much less than the appraisal would support and less than a grand of cash out).
Two, and more important, amending returns is a nuisance and a red flag. You can't file the amendment electronically, and that means shuffling a butt-ton of paper that was blissfully avoided when I did two sets of returns (ours and Em's) earlier today over teh Interwebs. There's also Conventional Wisdom among tax professionals that the IRS is much more likely to audit amended returns. I went through THAT delightful process a couple of years into self-employment, and even though I was cooperative and anal enough to get a no-change closeout of that audit, they could still use the occasion of the amendment to question anything and everything else on our return. While waiting for a mediation last week, a lawyer came into the mediator's office to drop off paperwork, and said she'd been subjected to Audit Hell where they wanted proof of every aspect of her business deductions. For business travel, no, maam, a credit card debit for your plane ticket wouldn't do; they want her boarding pass. Multiply THAT by 365 and you have serious disincentive to rock the boat.
The good news is, the deduction doesn't die- it just gets deferred. We can make the same dollar contributions, but they'll be for 2013, and we'll be limited to those 6,000-each maxes and won't be able to contibute any more until 2014 rolls around.
Fortunately, there are at least a couple under this roof who really don't care about any of this:
Duz ths meen U cn clame usses as dependaments?
IM-pediments is more like it, guys:P
Bear with the lawyer for a moment. Our tax year is the previous calendar year. For almost all purposes, Auld Lang Syne at midnight on New Years Eve drops an impenetrable wall on things. If you get a paycheck on January 2nd, or write a check for a charitable contribution during your New Years morning hangover, tough on you. Yet, since lawyers are involved in writing this nonsense, there's an important exception: IRS rules allow you to make contributions to retirement accounts for the previous tax year all the way up to the filing date of the return, which is on (or, for odd reasons, sometimes a day or two beyond) April 15th.
It can make a significant dent in your tax bill. Both of us being old farts, we're allowed to each contribute $6,000 to retirement accounts. Doing so before April 15th would cut our 2012 federal tax bill by 40 percent and turn a small state tax bill into a small refund. But we can't- since the money we were gonna use to fund those contributions was coming out of the refi.
We have a couple of options. One: if the money actually comes to us by April 15th, we could amend the returns to take the deductions and claim the savings. The problems with that, though, are twofold. One, we're still not sure if we will get the cash-out on time, and the ever-changing figures on the deal leave it totally to chance whether we'll have that much coming out (the original estimate had us getting much less than the appraisal would support and less than a grand of cash out).
Two, and more important, amending returns is a nuisance and a red flag. You can't file the amendment electronically, and that means shuffling a butt-ton of paper that was blissfully avoided when I did two sets of returns (ours and Em's) earlier today over teh Interwebs. There's also Conventional Wisdom among tax professionals that the IRS is much more likely to audit amended returns. I went through THAT delightful process a couple of years into self-employment, and even though I was cooperative and anal enough to get a no-change closeout of that audit, they could still use the occasion of the amendment to question anything and everything else on our return. While waiting for a mediation last week, a lawyer came into the mediator's office to drop off paperwork, and said she'd been subjected to Audit Hell where they wanted proof of every aspect of her business deductions. For business travel, no, maam, a credit card debit for your plane ticket wouldn't do; they want her boarding pass. Multiply THAT by 365 and you have serious disincentive to rock the boat.
The good news is, the deduction doesn't die- it just gets deferred. We can make the same dollar contributions, but they'll be for 2013, and we'll be limited to those 6,000-each maxes and won't be able to contibute any more until 2014 rolls around.
Fortunately, there are at least a couple under this roof who really don't care about any of this:
Duz ths meen U cn clame usses as dependaments?
IM-pediments is more like it, guys:P
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no subject
Date: 2013-03-25 12:19 am (UTC)Relax - it's over for another year. Pity the poor accountants dealing with the flood of corrected 1099s that went out this year.
no subject
Date: 2013-03-25 04:05 am (UTC)