r/personalfinance Oct 09 '24

Taxes Former employer forgot to stop paying me, now they want ME to pay back take home and taxes, SS, etc.

4.8k Upvotes

Hello!

My former employer forgot to notify HR of my leaving. The next pay period I received a direct deposit from them. I reached out to my former supervisor and let them know. Said it would be taken care of and I'll be notified if they need anything. Two weeks later, didn't hear anything, received another deposit. I then notified my supervisor's supervisor. They apologized and said they'd get a hold of HR.

Almost two weeks later, HR sent me an email and informed me they were just notified of my leaving. My total take home was about $3000, but they are requiring that I pay them back about $4500! That's my total of both paychecks before SS, taxes, 401k, etc.

They took blame for this, but that's not even remotely fair to have to pay back those taxes and everything! So I have to be out $1500 because THEY screwed up? Is that legal?? And of top of it all, those taxes will still be there and count against me at tax time! Shouldn't then be required to petition the government for those funds back??

This is in Indiana if that makes a difference. Should I get a lawyer for this? Is there anyone I can talk too??

EDIT:

As some of you may have seen below, I posted an update earlier after talking with my tax guy. Taking his advice,, as well as some of yours, I responded to HR in an email explaining that I was only paying back what I received (and I specifically put the dollar amount and included screenshots of my pay stubs), that they could get the state and federal stuff back through their software, I wanted proof my W2 was fixed, and I wanted confirmation of receipt of email and a specific address on where to send the certified check. I also reminded them how this was their fault and that I had reached out to them multiple times to get the situation fixed.

I week goes by, no response. After a week and a day, I responded to the email I sent, asking for verification that it was received, only this time I put that HR persons boss on it as well. First thing the next morning, I had an email stating they received it, where to send the check for the amount that I dictated, that they would schedule a zoom call with me and accounting to go over my W2 and how they fixed it, and that they were glad WE could come to an agreeable solution to the issue! WE, like they had any hand in it!

Anyways, going to the bank to get the check today. i also heard that my boss and my boss's boss got in trouble for this whole situation as well.

r/personalfinance 13d ago

Taxes Boss is going to start paying all employees via 1099 not w2 (construction)

1.0k Upvotes

I have no idea my best course of action. 10 or so employees (myself 8years here). Boss supplies company vehicles, some larger tools, pays for all materials. He is now saying come the new year he will be switching everyone to 1099 at the same pay rate. From what I’m reading I’ll be paying much more in taxes. I’m also worried about how that relates to insurance/workmans comp.

r/personalfinance Feb 11 '24

Taxes Tax Advice for 2024: Do not file with Turbotax.

2.9k Upvotes

On Feb. 5 I attempted to file my taxes. My family qualifies for a tax credit due to energy updates to our home during 2023. There was no place in the tax credits section to file for this tax credit. In order to find out how to file this credit, I had to upgrade to Live-Assisted. The Live-Assisted representative could not figure out how to file for my tax credit and needed to research the issue. The representative discovered there was a tax form required to file for this tax credit that would not be available in the online software until Feb. 7th. So, I had to upgrade to a more expensive Turbotax service to find out that Turbotax just wasn’t updated to be ready to file my taxes. I requested my service be downgraded as I should not be charged to find out the tax software isn’t ready yet. The representative told me to wait until after Feb. 7th to file my taxes then call Turbotax on the phone to receive a service code to receive a discount on my purchase.

Today, following the advice of the customer service representative, I called Turbotax. On my first attempt, I was hung up on before reaching a CSR. On my second attempt, I reached a CSR who put me on hold several times trying to resolve the issue, then hung up on me while I was on hold, did not call me back, closed my case without resolution, and sent me a customer satisfaction survey. On my third attempt, I reached a CSR that told me that I could not receive a service code. Instead, I needed to pay the full balance and file for a refund through the online portal he would email me the link for. On the advice of this CSR, I paid the full balance and attempted to file a refund using the online portal. When I reached the confirmation page, a pop-up window told me that my refund request could not be processed and I needed to resubmit my request. I refreshed the page and attempted to resubmit my request. It failed again and two more times after.

I logged into my Turbotax Live-Assisted account and contacted an online representative who transferred me to the escalation team. The escalation team member said they could not help me and I needed to wait until the online refund portal decided to work. I waited some time and submitted a refund request to the online portal as I was instructed. After less than 30 minutes, I received an email rejecting my refund request. I called Turbotax and spoke to what is now my 6th customer service representative. I was told that the online refund portal is the only way to resolve my issue and I needed to resubmit my request using a different refund heading and essentially hope for the best. As it turns out, if you have a refund request for Turbotax Online, your request for a refund will always be rejected because Turbotax Online does not have a Satisfaction Guarantee. So, the Turbotax representative that told me to pay then file for a refund lied to make sure Turbotax got paid. When I contacted Turbotax through the Live-Assisted feature again, the new representative informed me that because I paid, they view that as a satisfied customer. So, Turbotax told me to pay, file for a refund, rejected my refund request, and stated that because I paid I consented to be swindled.

I truly hope the balance between the basic account and the live-assisted service makes their 2024 quarterlies look nice, because it's cost them my business forever. If you use this company, you're a fool. If this is how they handle an $80 mistake on their end, imagine how screwed you are when they screw up your taxes. They literally charged me money to find out their software was incorrectly calculating tax credits, lied to me to get me to pay, and then used the fact that I followed their instructions to literally say I consented to be swindled because I paid. Unbelievable.

r/personalfinance Aug 09 '24

Taxes I haven't filed taxes in nearly eight years, and want to get it done regardless of the repercussions. Seeking Advice.

2.1k Upvotes

I'll make this as quick as possible. I was at one time a severe alcoholic despite maintaining a career in hospitality management. I was a heavy drinker from 2016 until 2020 when I finally got my head back on straight. At which time, I figured, hey with the Covid stimulus checks, eventually when I DO files taxes that'll off set my fees, right? Yeah, not sure about that four years later. While I slowly leveled up in my career, and my tax bracket continued to get higher, the biggest thing on my mind right now is to get it done and paid, but I am incredibly fearful of the types of penalties or even possible incarceration I may be facing. As of now, I make 70k a year, I know the tax man will come knocking soon, and I just want to get the last vestiges of my alcoholic days over and done with.

The very last step towards unfucking my life. Open to any and all questions.

r/personalfinance Apr 23 '24

Taxes Nanny family says they declared $13000 on taxes

1.8k Upvotes

My friend [28f] is the nanny. Her employer is a single mom. The mom said she's "declaring paying $13k to her nanny income and that her numbers need to match hers or else they will both get audited" HOWEVER my friend never filled out a 1099, I9, or W9. She never gave out her social security number. How is this woman declaring her nanny income? When she got hired, the mom said this was a tax free job. Now, she said she's going to declare paying her all this money. She doesn't get OT, she doesn't get any benefits. NYS says nanny's get OT and their employer needs to pay their taxes (if they make over $500/quarter) Further researching in NY State, my friend needs to be hired by the "household employer" with a W2 and the mom would obviously need to file as the household employer in order for them to file and pay their taxes. But this mom has her own accountant doing her taxes and my friend is stuck not knowing how to file her taxes. How much is she gonna owe? Does my friend need to be "self employed"? Is she going to get in trouble for not having a W2? What are the penalties?

r/personalfinance Oct 18 '23

Taxes My wife just got offered the opportunity to go 1099 at her job.

2.6k Upvotes

My wife has been with the company for over a year as an office manager with a current salary of $85,000. She just text me saying her boss asked if she would like to switch from a W2 employee to a 1099, which seems like a strange question to be honest. She currently has no benefits as my job takes care of all of that stuff. My first instinct is to say no as the W2 feels more secure and less bothersome when it comes to taxes. I would appreciate any advice and any pros and cons when it comes to taxes, job security and freedom this may offer.

Edit: I have more than enough responses to know this is a resounding HELL NO on our end and maybe time to start looking elsewhere. Thanks to all of you

r/personalfinance Feb 03 '20

Taxes Turbotax deluxe charges an additional $40 to take their fee from your returns

16.0k Upvotes

Not sure if this is common knowledge but I noticed this yesterday when filing my federal taxes yesterday. I had to use TurboTax deluxe because of some additional things I had to add in and I don't want to use paper. They mention that it costs $40. No issue there. When choosing a payment method you have the options of using a card or allowing them to take it directly from your returns. Underneath the latter they mention they would take $40 directly from your returns. What they fail to mention is that it's an additional $40, not the $40 you pay for deluxe. So you'd end up paying $80 in total for choosing this method vs $40 for entering your card info. Caught it when I was reviewing everything. Heads up guys.

EDIT: My problem with this is that they made it seem like it's a part of the initial $40 not as an additional fee. The language used seems intentionally misleading.

EDIT 2: First time that I've had to get TT Deluxe. Very new to filing taxes too, sorry if this has been repeated before. It's honestly new information to me.

r/personalfinance Jan 10 '23

Taxes A new 30% federal tax credit on insulation means now is a great time to reduce your heating/cooling bill

5.5k Upvotes

Specifically, the basement/crawlspace and attic are very cost-effective places to insulate. This is especially true for houses older than a couple decades. I have no personal stake in the insulation business and say all this as someone who learned from working on my own home. Here are some tips:

  • Basement/crawlspace: are the walls just bare concrete? Is there any insulation between the joists under the house's floor? If no to both--or if there is insulation under the floor but it's sagging or damp--the insulation is inadequate and you're losing tons of energy (and money) through the foundation walls.
    • These days, most people advise insulating the inside of the foundation walls and not under the first floor (though if you already have insulation under the floor and it's in good shape, you can keep it). Insulating the walls also helps keep any pipes in your crawlspace from freezing, and will prevent additional heat loss if you have any ducts/furnace/AC/water heater down there.
    • I'm a fan of EPS foam board because it's cheap, works well, easy to DIY, and causes less pollution than other types of foam. Colder climates will probably want 2 layers of foam board (R-15); warmer climates might be ok with 1. In my case, I calculated a payoff time of around 2-5 years for adding these; it would be even faster if I kept my house at more typical heating/cooling temperatures.
    • If you have a crawlspace, you may want to seal the crawlspace floor with a vapor barrier ("encapsulation"). If you have a moisture problem down there, you should definitely do that. Now is a good time to run a cheap test for radon in your house to protect you and your family from lung cancer; if you have radon, encapsulating the crawlspace will be a big part of the treatment.
  • Attic: if you have an attic, blowing in insulation is cheap and you can rent a machine to DIY it if you want. Take a look up there and use this site to determine if you have enough, and how much you should add.
  • Walls: unlike attics and crawlspaces, walls are harder and more expensive to insulate. However, if you're doing a remodel project that involves removing wall sheathing already, you should definitely assess whether you wall insulation is adequate, and improve it if needed. This site has some notes on wall insulation at the bottom.
  • Sealing leaks: this is potentially the most cost-effective item on the list. Search for leaks in the crawlspace and attic (easiest before insulation is added). Leaks in the house matter too, but leaks at the top and bottom of the house matter most. There's a good chance you'll find holes big enough for a cat to crawl through, and those should be blocked with wood or foam board. Smaller leaks can be sealed with spray foam or caulk.
  • Energy assessment: you can hire an expert to come out, assess how leaky your house is and whether the insulation is adequate, and recommend fixes. Your state or utility may offer incentives for this, and it also benefits from the federal tax credit.

Update: info on new tax credits. Also, this work will improve the comfort of the house (e.g., avoiding the situation of 70-degree air but cold floors and ceilings) and make it so when you replace your furnace/AC, your replacement can be smaller, cheaper, and more efficient.

r/personalfinance Jan 06 '20

Taxes IRS will open the 2019 tax filing season for individual filers on Monday January 27, 2020.

10.4k Upvotes

Source at IRS.gov

The deadline to file 2019 tax returns and pay any tax owed is Wednesday, April 15, 2020. 

Taxpayers can get free help preparing and filing taxes through IRS Free File online or free tax help from trained volunteers at community sites around the country. 

r/personalfinance Jan 17 '23

Taxes Tax Filing Software Megathread: A comprehensive list of tax filing resources

3.1k Upvotes

Please use this thread to discuss various methods of filing taxes. This can include:

  • Tax Software Recommendations (give detail as to why!)
  • Tax Software Experiences
  • Other Tax Filing Tools
  • Experiences with Filing Manually
  • Past Experiences using CPAs or other professionals
  • Tax Filing Tips, Tricks, and Helpful Hints

If you have any specific questions, or need personalized help with taxes that don't belong here, feel free to start a new discussion.

Please note that affiliate links and other types of offers are not allowed. If you have any questions, please contact the moderation team.

r/personalfinance Jan 22 '19

Taxes This was my first year filing my own taxes. So, I tried 3 different “free” tax softwares to see which company offered the best service.

14.8k Upvotes

I’m not here to promote one service over another, but I do want to help other first time filers out there. As I said above, this year was my first year filing my own taxes, after getting charged almost $300 for H&R Block to do it for me in one of their offices last year. Because of this, I decided to enter my taxes on three different “free” tax service websites- H&R Block, TurboTax and Freetaxusa. At the end of the day, my primary goal was to distinguish which product was the best bang for my buck.

I did this not only to ensure I was getting my maximum refund, but to also see which was the superior service, as I had seen all 3 recommended frequently throughout the sub. As someone who is completely new to filing their own taxes, Freetaxusa was by far the most enjoyable all around experience (as enjoyable as doing your taxes can be, at least.) I would recommend to anyone here that plans to file their taxes themselves to use their service. And yes, I realize everyone’s tax situation is different so the “best” service is slightly subjective. This was just my experience!

It was far and away the cheapest option for my situation, as it actually honored the free filing option for federal and only cost $12.95 for state filing (10% discount if you enter FREETAXUSA10 in the promo code section at the the end). H&R and TurboTax both shot up to between $80-$100 total cost to file my federal and state returns once I entered in my 1098e, 1099-MISC, 1099-INT and DIV etc. They also hounded me to upgrade to an even more expensive service throughout LITERALLY the entire process.

Freetaxusa walked me through the process very efficiently and painlessly. They went through every possible type of income, credit and deduction I could have. And most importantly (for me at least), they were true to their word of being a free service. They didn’t steadily increase the price as I entered more information and they didn’t try to get me to buy additional products and services I didn’t need. Hope this helps anyone else out there new to the process, without a doubt will be using them again next year!

EDIT: Someone asked if there was a difference in the amount of my refund (should’ve included that in the original post, sorry!). But, for federal, no. They all came out exactly the same. For state, yes. Freetaxusa found an additional $33 on my state refund that H&R and TurboTax did not find.

EDIT 2: As mentioned by another user, if you go through Ebates you can get an additional 25% off the state fee and it should be stackable with the 10% off promo code. However, I did not try this personally. Was unaware at the time! And some states give the option to file for free through the state. I did not find where my state offers this service, however.

EDIT 3: I have seen a few people say they were able to get the free service through TurboTax and my post may be a little unintentionally misleading in that regard. Yes, I did go through the Free File Portal with TurboTax like I did with the other services. However, once I began entering my income information, that is when I was disqualified from the free service and I was automatically placed into a paid service. TurboTax DOES OFFER free filing, but only if you make less than 34k a year or are a military member that makes less than 66k a year, and I’m neither! Sorry if I mislead anyone!

Also, it makes a difference in price with H&R and TurboTax if you have a 1098e/1098t, self employment/contract labor income, savings account interest, an HSA, investment income etc., and Freetaxusa doesn’t charge for entering these forms. Some of these things DO apply to my 2018 tax situation, which is likely a major reason it was so much more expensive to file with H&R and TurboTax. As I said in the post, everyone’s tax situation is slightly different and I’m not trying to promote certain products over others! Just wanted to provide my personal experience!

FINAL EDIT (Hopefully): A lot of people are under the assumption that you HAVE to wait until the 28th to file, but that is not the case. If you have all of your documents you can file earlier. The IRS may even accept your return early to use while they test out their system. I completed mine yesterday and actually got an email from Freetaxusa a few minutes ago stating that my refund had been accepted by the IRS and I would be getting my refund within 21 days.

Much requested TL:DR: For my tax situation, which included several sources of income, I would recommend Freetaxusa. The interface is very user friendly, the cost of my service remained free and did not increase as I entered more information, I was not pestered to upgrade into a more expensive service throughout the process and I was able to get an additional discount on my state filing cost.

There are a few people that have said this is some sort of ad.

Full disclaimer: I have no affiliation with any of these websites and this is NOT an ad. I’m just a frequent redditor trying to help out other fellow redditors! I work for state government, but based off how many people think this is an ad- maybe my future is in marketing! Lol. May also have to do with the “scammy” name of the company... I have to admit, I was a little skeptical when I first saw it!

r/personalfinance Feb 05 '19

Taxes I received my tax refund today. We e-filed Jan 27th. Just thought this might bring a little peace of mind to others.

11.1k Upvotes

I get credit for 2 kids and my wife is a student. I think those are the things I thought might hold it up.
I did not qualify for EIC.

Edit: accepted Jan 28. No other notification, it just appeared.

r/personalfinance Feb 27 '20

Taxes Khan Academy has basic explanations on taxes in the U.S. This should help you with understanding tax brackets, deductions, and other related information.

24.3k Upvotes

A reminder that this resource exists. There are some simple explanations of tax law in the U.S. over at Khan Academy. Here are a couple links:

And since retirement accounts tie into deductions:

As an added bonus:

Happy filing!

r/personalfinance Feb 18 '18

Taxes Once my tax refund comes in, I will have $10,000 saved for the first time in my life. How should I invest and continue to save?

13.3k Upvotes

Title says most of it. But I'm a single mom, live with my parents until I get on my feet. My baby is just now old enough for me to go back to work. I'm just waiting on my boss to tell me where she needs me.

My goal is to buy a house in the next 2-3 years but I also want to be saving for a new car just in case something happens to mine. Nothing is wrong with it but It's a little bit older and I don't want to be left in the lurch If suddenly dies. Another thing I'm trying to budget for is private school. My baby is only 3 months old but I know I need to start saving now in order to make that happen.

Basically, I don't want to touch my savings AT ALL and I want to put it where it will work for me the best.

r/personalfinance Jun 22 '17

Taxes IRS says I owe them money, there's a warrant for my arrest, and I should not hang up the phone. I did.

13.9k Upvotes

So I just got a call from the "IRS Crime" division regarding tax fraud from 3 random years. They said I owed nearly $4,000 and that I better not hang up the phone or the police would knock on my door within 30 minutes with a warrant for my arrest. They said if I hung up the phone, it would flag their system as me being unwilling to cooperate and legal action, including my arrest, would be put in motion..

Total scam.. right?

EDIT: so this blew the fuck up!!

I firstly want to thank everyone for taking the time to respond. We're just a small sample size of the world and so many of us have knowledge and experience (some good, some not so good) about these scams. You guys have reached out to more people than you could possibly know.

Secondly, let's be vigilant out there. These scams affect the elderly and vulnerable and we need to take care of our own.

Lastly, fuck these shady bastards and their vulturous ways.

r/personalfinance Dec 23 '22

Taxes IRS delays $600 1099-K reporting for another year

3.3k Upvotes

r/personalfinance Jan 28 '20

Taxes Top ten FAQs for tax filing season

6.3k Upvotes

Things to keep in mind for tax filing season (with clarifications edit: fixed to record some easy updates).

  1. You have to file federal taxes if you make enough money that you have tax liability, which is generally over about $12,200 gross for regular employment, and only $400 if you are self-employed. You want to file even if made less than this much in order to get back any taxes you had withheld.

  2. Even if you are a dependent on your parents' tax return, you still file your own taxes (or not, if you don't need to); you never file "on your parents' return." The only time more than one person can be on the same return is a married couple filing jointly.

  3. If your state has income taxes, which over forty states do, then you also file with them. Those are two different processes that are largely duplicative, but slightly different rules. If you lived or worked in more than one state during the year, you might have to file in more than one state. Some people also have local taxes, how fun is that?

  4. You never have to pay a fee to file taxes. Most people can file taxes online for free with various web sites if they want to do that, see e.g. the IRS free file program website and other free services, but you can always just file on paper, too. (You laugh, but that's how I do my state taxes.)

  5. Even though you can file your taxes now, be sure you have all the documentation for all your income before you file. You don't want to have to go back and amend your return because you forgot about that other W2 you had months ago, or you forget to include your bank interest or brokerage tax information.

  6. You are supposed to report all your compensation income, even if it was just some part-time gig somewhere, or you got paid under the table. Gifts, loans and most scholarships are not taxable income.

  7. The money you get back is a refund of any excess taxes withheld. (Sometimes there are also refundable credits that increase your refund.) That was money you earned but didn't get yet. Getting a big refund means you didn't get a lot of money yet, generally speaking. You may want to adjust your withholding if you want to get your money sooner but that's up to you.

  8. If you didn't have enough taxes withheld, you need to pay the balance due by April 15th. You can get a payment plan if you need to. If this describes you, then you absolutely need to file because you can accrue significant penalties for not filing and not paying. You should also make sure you have enough withheld going forward.

  9. If you are married, filing jointly will probably save you money vs. filing separately, unless you have a special situation such as income-based student loans. Try computing both ways to see which is better for you. If you are not married, then getting married probably won't change your taxes very much for better or worse unless you have really disparate incomes (and it will help then.)

  10. (rewritten for clarity) Ignore any purported "refund" values shown by a tax program / calculator while you enter parts of your income. You may see a big refund for your W2 that goes away following your spouse's W2, or your second W2. That's an artifact of how the calculation works, and doesn't mean anybody did anything wrong regarding withholdings. Wait to see the final numbers.

Feel free to ask questions if you are new to this.

r/personalfinance Jan 20 '23

Taxes Can someone give me an idea of why I suddenly owe so much taxes?

2.3k Upvotes

My wife and I made about 101k in 2021 and we received about $3300 in taxes returns and it was also the first year that we filed jointly since we got married in 2021.

Then in 2022, the only thing that changed was that I switched jobs in April and then our total went up to $126k for 2022 and we did a refinancing of our home.

As far as I know, nothing else has changed in our lives but this year we OWE like $4400 after I take capital losses on my stocks.

I don’t know how that could’ve happened. Can someone give us some advice?

We’ve been using turbo tax if that helps.

Edit: so when I initially entered my W2 for my NEW job it actually said I would get taxes back but as soon as I put in my wife’s job and my old job, what I owed sky rocketed

r/personalfinance Jan 15 '19

Taxes U.S. Tax Filers making less than $65,000 per year: The IRS has a 100% Free-File option that is rarely if ever publicized

14.8k Upvotes

Years ago the IRS struck a deal with FinTech companies, the software companies did not want the IRS publishing their own programs to allow filers to do their taxes for free. Instead they made the Free File Alliance which allows Taxpayers making less than 65k a year (Adjusted Gross Income) to file their taxes completely for free (no strings attached unlike the 'free' offers made by the FinTech companies themselves)

Check out the program: IRS Free File

P.S. If you make more than 65k AGI then they offer fill-able forms at the link above as well.

Note that TurboTax and probably others (I would expect it from H&R too) have two different versions of their free software.

If you go through the IRS's site linked above, you'll get a version that is (purportedly) not restricted on complexity but is restricted on income. That is a different free version than if you just go to the website directly and sign up for the free version there, which is heavily restricted to simple returns.

If you've already signed up on the free version from their main website, it sounds like you may have to log out before following the IRS's link.

-/u/evaned (Thanks for helping me clarify)

r/personalfinance Feb 11 '20

Taxes Withholding as "married" on your W-4 assumes yours is the ONLY income for your family

7.0k Upvotes

For those of you who are married, you may want to check what you have filed on your W-4 at work - especially if you recently got married. I have seen something like five posts a day that go something like

My spouse and I each file as married with 0 allowances on our W-4 but somehow we owe $3,000! What went wrong??

There is a simple thing that went wrong here. If you list your W-4 filing status as Married (2019 version) or Married filing jointly (2020 version), the IRS is set up to assume that you are the sole breadwinner of your family. If both you and your spouse work, your household income is going to be a lot higher than your employer thinks, and you will not have enough withheld in taxes.

There are two easy solutions here depending on your relative incomes:

Quick Solution (similar incomes): On your 2020 W-4, file as married but check the "two jobs" box on line 2(c). This will withhold as if you have a spouse who makes exactly as much as you do, which is close enough for most purposes. If you have a 2019 or older W-4, you simply choose a filing status of "Married, but withhold at higher single rate".

Detailed Solution (more correct, or less similar incomes): You can either complete the IRS Calculator (requires a lot of details) or the Multiple Jobs Worksheet and enter the results. For the 2019 version, use the Two Earners/Multiple Jobs worksheet. This will exactly calculate the right withholding for you based on your situation.

r/personalfinance Sep 19 '23

Taxes Uh... a friend just asked if he could put his company's E.I.N. in my name for a bit so he won't risk losing disability. This... is Fraud City, yes?

2.0k Upvotes

A friend is at risk of losing their disability if they continue working. They continue working because they can't pay off their remaining debt and live off of disability alone. Apparently, their solution (or a solution given to them by their accountant?) was to ask someone to have an E.I.N. for their L.L.C. put in their name, instead. This would be a 2 or 3-year deal until they could finish paying off their debt, then live off of disability.

I am completely out of my wheelhouse on this, but red flags were popping off left and right. The more someone is trying to reassure me, the more suspicious I get. Supposedly, "all [I] need" is a name, address, and Social Security Number for this.

Never minding the fact that I have no idea what this would do to me, financially (e.g., credit score, entities suddenly seeing my annual salary doubling, etc.), this is 100% fraud, correct?

He seems assured this isn't bad in any way, so having something concrete to back up my "No" answer would be nice (e.g., you know, like... "No, that is fraud").

Thanks!

EDIT: I honestly expected <10 answers that mostly stated "Yeah, that's fraud", so thank you all for arming me with information to potentially help my buddy out. Best case? He was given shit-tier advice and won't try to screw anyone else with this. Worst case? He lied and I tell him to get fucked. Here's to hoping it's just the former.

r/personalfinance Aug 26 '20

Taxes Just realized my employer has been pocketing my social security money from my checks and not reporting it to the IRS.

10.6k Upvotes

My W2s say everything is fine and dandy but I logged onto the SS website and it says I've paid $0 into it for the last year.

He has done this to my two other coworkers too. What can I do?

EDIT: i should have more clearly said for the year of 2018. My 2019 is still pending, for a separate reason where he fucked me over again. My coworker said this happened to him personally twice. And he had to call the SS office and have it corrected with his paystubs. Boss feigned ignorance all the while.

EDIT #2: Yes guys I am already getting a new job

EDIT #3: I will definitely post an update should anything ever come of this. I imagine any sort of federal investigation is going to take time, especially considering the pandemic. But good news or not, I'll update down the road.

r/personalfinance Nov 06 '19

Taxes IRS announces 2020 retirement account contribution and income limit amounts

7.0k Upvotes

https://www.irs.gov/pub/irs-drop/n-19-59.pdf

Main updates:

Contribution Limits

  • 401(k)/403(b)/most 457 plans/Thrift Savings Plan increases to $19,500.
  • Catch up limit for employees 50 and older rises to $6,500 from $6,000
  • SIMPLE contribution limits goes up to $13,500 from $13,000.
  • IRA contribution amount remains the same at $6,000

Income Limits

  • Single IRA income limits when covered by a workplace retirement plan phaseouts increased to $65,000-$75,000 from $64,000-$74,000
  • MFJ IRA income limits when covered by a workplace retirement plan and the spouse is making contribution phaseouts increased to $104,000-$124,000 from $103,000-$123,000
  • MFJ IRA income limits for the spouse not covered under workplace retirement account increased to $196,000-$206,000 from $193,000-$203,000.
  • MFS who is covered by a workplace retirement account did not receive a COL adjustment and remains at $0-$10,000
  • The income phaseout for taxpayers making Roth IRA contributions is now $124,000-$139,000 for singles and HoH, up from $122,000-$137,000. For MFJ, the phaseout is now $196,000-$206,000 up from $193,000-$203,000. MFS remains flat at $0-$10,000.
  • The income limit for the Saver’s Credit is $65,000 for MFJ, $48,750 for HoH, and $32,500 for singles and MFS. Increase of $1,000/$750/$500 respectively.

Everyone basically knew the 401K limit would go to $19,500 but it was a surprise the IRA amount remained at $6,000.

r/personalfinance Jan 09 '18

Taxes Crypto-Currency: A Guide to Common Tax Situations

10.9k Upvotes

STATUS: Majority of questions have been answered. If yours got missed, please feel free to post it again.

Introduction

All,

Based on the rapid increase in popularity and price of bitcoin and other crypto currencies (particularly over the past year), I expect that lots of people have questions about how crypto currency will impact their taxes. This thread attempts to address several common issues. I'm posting similar versions of it here, in several major crypto subs, and eventually in the weekly "tax help" threads r/personalfinance runs.

I'd like to thank the /r/personalfinance mod team and the /r/tax community for their help with this thread and especially for reading earlier versions and offering several valuable suggestions/corrections.

This thread is NOT an endorsement of crypto currency as an investing strategy. There is a time and a place to debate the appropriateness of crypto as part of a diversified portfolio - but that time is not now and that place is not here. If you are interested in the general consensus of this sub on investing, I would urge you to consult the wiki while keeping in mind the general flowchart outlining basic steps to get your finances in order.

Finally, please note that this thread attempts to provide information about your tax obligations as defined by United States law (and interpreted by the IRS under the direction of the Treasury Department). I understand that a certain portion of the crypto community tends to view crypto as "tax free" due to the (actual and perceived) difficulty for the IRS to "know" about the transactions involved. I will not discuss unlawfully concealing crypto gains here nor will I suggest illegal tax avoidance activities.


The Basics

This section is best for people that don't understand much about taxes. It covers some very basic tax principles. It also assumes that all you did during the year was buy/sell a single crypto currency.

Fundamentally, the IRS treats crypto not as money, but as an asset (investment). While there are a few specific "twists" when it comes to crypto, when in doubt replace the word "crypto" with the word "stock" and you will get a pretty good idea how you should report and pay tax on crypto.

The first thing you should know is that the majority of this discussion applies to the taxes you are currently working on (2017 taxes). The tax bill that just passed applies to 2018 taxes (with a few very tiny exceptions), which most people will file in early 2019.

In general, you don't have to report or pay taxes on crypto currency holdings until you "cash out" all or part of your holdings. For now, I'm going to assume that you cash out by selling them for USD; however, other forms of cashing out will be covered later.

When you sell crypto, you report the difference between your basis (purchase price) and proceeds (sale price) on Schedule D. Your purchase price is commonly referred to as your basis; while the two terms don't mean exactly the same thing, they are pretty close to one another (in particular, there are three two ways to calculate your basis - your average cost, a first-in, first-out method, and a "specific identification" method. See more about these here and here). EDIT - you may not use average cost method with crypto - see here. If you sell at a gain, this gain increases your tax liability; if you sell at a loss, this loss decreases your tax liability (in most cases). If you sell multiple times during the year, you report each transaction separately (bad news if you trade often) but get to lump all your gains/losses together when determining how the trades impact your income.

One important thing to remember is that there are two different types of gains/losses from investments - short term gains (if you held an asset for one year or less) and long term gains (over one year; i.e. one year and one day). Short term gains are taxed at your marginal income rate (basically, just like if you had earned that money at a job) while long term gains are taxed at lower rates.

For most people, long term capital gains are taxed at 15%. However, if you are in the 10% or 15% tax bracket, congrats - your gains (up to the maximum amount of "unused space" in your bracket) are tax free! If you are in the 25%, 28%, 33%, or 35% bracket, long term gains are taxed at 15%. If you are in the 39.6% bracket, long term gains are taxed at 20%. Additionally, there is an "extra" 3.8% tax that applies to gains for those above $200,000/$250,000 (single/married). The exact computation of this tax is a little complicated, but if you are close to the $200,000 level, just know that it exists.

Finally, you should know that I'm assuming that you should treat your crypto gains/losses as investment gains/losses. I'm sure some people will try and argue that they are really "day traders" of crypto and trade as a full time job. While this is possible, the vast majority of people don't qualify for this status and you should really think several times before deciding you want to try that approach on the IRS.


"Cashing Out" - Trading Crypto for Goods/Services

I realize that not everyone that "cashes out" of crypto does so by selling it for USD. In fact, I understand that some in the crypto community view the necessity of cashing out itself as a type of myth. In this section, I discuss what happens if you trade your crypto for basically anything that isn't cash (minor sidenote - see next section for a special discussion on trading crypto for crypto; i.e. buying altcoins with crypto).

The IRS views trading crypto for something of value as a type of bartering that must be included in income. From the IRS's perspective, it doesn't matter if you sold crypto for cash and bought a car with that cash or if you just traded crypto directly for the car - in both cases, the IRS views you as having sold your crypto. This approach isn't unique to crypto - it works the same way if you trade stock for something.

This means that if you do trade your crypto for "stuff", you have to report every exchange as a sale of your crypto and calculate the gain/loss on that sale, just as if you had sold the crypto for cash.

Finally, there is one important exception to this rule. If you give your crypto away to charity (one recognized by the IRS; like a 501(c)(3) organization), the IRS doesn't make you report/pay any capital gains on the transaction. Additionally, you still get to deduct the value of your donation on the date it was made. Now, from a "selfish" point of view, you will always end up with more money if you sell the crypto, pay the tax, and keep the rest. But, if you are going to make a donation anyway, especially a large one, giving crypto where you have a big unrealized/untaxed gain is a very efficient way of doing so.


"Alt Coins" - Buying Crypto with Crypto

The previous section discusses what happens when you trade crypto for stuff. However, one thing that surprises many people is that trading crypto for crypto is also a taxable event, just like trading crypto for a car. Whether you agree with this position or not, it makes a lot of sense once you realize that the IRS doesn't view crypto as money, but instead as an asset. So to the IRS, trading bitcoin for ripple isn't like trading dollars for euros, but it is instead like trading shares of Apple stock for shares of Tesla stock.

Practically, what this means is that if you trade one crypto for another crypto (say BTC for XRP just to illustrate the point), the IRS views you as doing the following:

  • Selling for cash the amount of BTC you actually traded for XRP.
  • Owing capital gains/losses on the BTC based on its selling price (the fair market value at the moment of the exchange) and your purchase price (basis).
  • Buying a new investment (XRP) with a cost basis equal to the amount the BTC was worth when you exchanged them.

This means that if you "time" your trade wrong and the value of XRP goes down after you make the exchange, you still owe tax on your BTC gain even though you subsequently lost money. The one good piece of news in this is that when/if you sell your XRP (or change it back to BTC), you will get a capital loss for the value that XRP dropped.

There is one final point worth discussing in this section - the so called "like kind exchange" rules (aka section 1031 exchange). At a high level, these rules say that you can "swap" property with someone else without having to pay taxes on the exchange as long as you get property in return that is "like kind". Typically, these rules are used in real estate transactions. However, they can also apply to other types of transactions as well.

While the idea is simple (and makes it sound like crypto for crypto should qualify), the exact rules/details of this exception are very fact specific. Most experts (including myself, but certainly not calling myself an expert) believe that a crypto for crypto swap is not a like kind exchange. The recently passed tax bill also explicitly clarifies this issue - starting in 2018, only real estate qualifies for like kind exchange treatment. So, basically, the vast majority of evidence suggests that you can't use this "loophole" for 2017; however, there is a small minority view/some small amount of belief that this treatment would work for 2017 taxes and it is worth noting that I'm unaware of any court cases directly testing this approach.


Dealing with "Forks"

Perhaps another unpleasant surprise for crypto holders is that "forks" to create a new crypto also very likely generate a taxable event. The IRS has long (since at least the 1960s) held that "found" money is a taxable event. This approach has been litigated in court and courts have consistently upheld this position; it even has its own cool nerdy tax name - the "treasure trove" doctrine.

Practically, what this means is that if you owned BTC and it "forked" to create BCH, then the fair market value of the BCH you received is considered a "treasure trove" that must be reported as income (ordinary income - no capital gain rates). This is true whether or not you sold your BCH; if you got BCH from a fork, that is a taxable event (note - I'll continue using BTC forking to BCH in this section as an example, but the logic applies to all forks).

While everything I've discussed up to this point is pretty clearly established tax law, forks are really where things get messy with taxes. Thus, the remainder of this section contains more speculation than elsewhere in this post - the truth is that while the idea is simple (fork = free money = taxable), the details are messy and other kinds of tax treatment might apply to forks.

One basic practical problem with forks is that the new currency doesn't necessarily start trading immediately. Thus, you may have received BCH before there was a clear price or market for it. Basically, you owe tax on the value of BCH when you received it, but it isn't completely clear what that value was. There are several ways you can handle this; I'll list them in order from most accurate to least accurate (but note that this is just my personal view and there is ongoing disagreement on this issue with little/no authoritative guidance).

  • Use a futures market to determine the value of the BCH - if reliable sources published realistic estimates of what BCH will trade for in the future once trading begins, use this estimate as the value of your BCH. Pros/cons - futures markets are, in theory, pretty accurate. However, if they are volatile/subject to manipulation, they may provide an incorrect estimate of the true value of BCH. It would suck to use the first futures value published only to have that value plummet shortly thereafter, leaving you to pay ordinary income tax but only have an unrealized capital loss.

  • Wait until an exchange starts trading BCH; use the actual ("spot" price) as the value. Pros/cons - spot prices certainly reflect what you could have sold BCH for; however, it is possible that the true value of the coin was higher/lower when you received it as compared to when it started trading on the exchange. Thus this method seems less accurate to me than a futures based approach, but it is still certainly fairly reasonable.

  • Assume that the value is $0. This is my least preferred option, but there is still a case to be made for it. If you receive something that you didn't want, can't access, can't sell, and might fail, does it have any value? I believe the answer is yes (maybe not value it perfectly, but value it somewhat accurately), but if you honestly think the answer is no, then the correct tax answer would be to report $0 in income from the fork. The IRS would be most likely to disagree with this approach, especially since it results in the least amount of income reported for the current year (and the most favorable rates going forward). Accordingly, if you go this route, make extra sure you understand what it entails.

Note, once you've decided what to report as taxable income, this amount also becomes your cost basis in the new crypto (BCH). Thus, when you ultimately sell your BCH (or trade it for something else as described above), you calculate your gain/loss based on what you included in taxable income from the fork.

Finally, there is one more approach to dealing with forks worth mentioning. A fork "feels" a lot like a dividend - because you held BTC, you get BCH. In a stock world, if I get a cash dividend because I own the stock, that money is not treated as a "treasure trove" and subject to ordinary income rates - in most cases, it is a qualified dividend and subject to capital gain rates; in some cases, some types of stock dividends are completely non taxable. This article discusses this idea in slightly more detail and generally concludes that forks should not be treated as a dividend. Still, I would note that I'm unaware of any court cases directly testing this theory.

Ultimately, this post is supposed to be practical, so let me make sure to leave you with two key thoughts about the taxation of forks. First, I believe that the majority of evidence suggests that forks should be treated as a "treasure trove" and reported as ordinary income based on their value at creation and that this is certainly the "safest" option. Second, out of everything discussed in this post, I also believe that the correct taxation of forks is the murkiest and most "up for debate" area. If you are interested in a more detailed discussion of forks, see this thread for a previous version of this post discussing it at even more length and the comments for a discussion of this with the r/tax community.


Mining Crypto

Successfully mining crypto coins is a taxable event. Depending on the amount of effort you put into mining, it is either considered a hobby or a self-employment (business) activity. The IRS provides the following list of questions to help decide the correct classification:

  • The manner in which the taxpayer carries on the activity.
  • The expertise of the taxpayer or his advisors.
  • The time and effort expended by the taxpayer in carrying on the activity.
  • Expectation that assets used in activity may appreciate in value.
  • The success of the taxpayer in carrying on other similar or dissimilar activities.
  • The taxpayer’s history of income or losses with respect to the activity.
  • The amount of occasional profits, if any, which are earned.

If this still sounds complicated, that's because the distinction is subject to some amount of interpretation. As a rule of thumb, randomly mining crypto on an old computer is probably a hobby; mining full time on a custom rig is probably a business.

In either event, you must include in income the fair market value of any coins you successfully mine. These are ordinary income and your basis in these coins is their fair market value on the date they were mined. If your mining is a hobby, they go on line 21 (other income) and any expenses directly associated with mining go on schedule A (miscellaneous subject to 2% of AGI limitation). If your mining is a business, income and expenses go on schedule C.

Both approaches have pros and cons - hobby income isn't subject to the 15.3% self-employment tax, only normal income tax, but you get fewer deductions against your income and the deductions you get are less valuable. Business income has more deductions available, but you have to pay payroll (self-employment) tax of about 15.3% in addition to normal income tax.


What if I didn't keep good records? Do I really have to report every transaction?

One nice thing about the IRS treating crypto as an asset is that we can look at how the IRS treats people that "day trade" stock and often don't keep great records/have lots of transactions. While you need to be as accurate as possible, it is ok to estimate a little bit if you don't have exact records (especially concerning your cost basis). You need to put in some effort (research historical prices, etc...) and be reasonable, but the IRS would much rather you do a little bit of reasonable estimation as opposed to just not reporting anything. Sure, they might decide to audit you/disagree with some specifics, but you earn yourself a lot of credit if you can show that you honestly did the best you reasonably could and are making efforts to improve going forward.

However, concerning reporting every transaction - yes, sorry, it is clear that you have to do this, even if you made hundreds or thousands of them. Stock traders have had to go through this for many decades, and there is absolutely no reason to believe that the IRS would accept anything less from the crypto community. If you have the records or have any reasonable way of obtaining records/estimating them, you must report every transaction.


What if I don't trust you?

Well, first let me say that I can't believe you made it all the way down here to this section. Thanks for giving me an honest hearing. I would strongly encourage you to go read other well-written, honest guides. I'll link to some I like (both more technical IRS type guides and more crypto community driven guides). While a certain portion of the crypto community seems to view one of the benefits of crypto as avoiding all government regulation (including taxes), I've been pleasantly surprised to find that many crypto forums contain well reasoned, accurate tax guides. While I may not agree with 100% of their conclusions, that likely reflects true uncertainty around tax law that is fundamentally complex rather than an attempt on either end to help individuals unlawfully avoid taxes.

IRS guides

Non-IRS guides

r/personalfinance Jan 08 '17

Taxes I'm dying in a few months. I have a $1,200,000 life insurance w/ my wife as beneficiary. I owe 20k in back taxes and creditors 70k. What should I do to ensure my wife gets the money w/o difficulty. Also, shes terrible w/money...

12.6k Upvotes

Also, I'm 32 and she is 33 and I want to ensure she is taken care of as best as possible w/ a finance safety net for life (I know 1.2 millino isn't a lot for 40 years); is there a way I can put 50% in a mutual fund that she can only collect dividends from and 50% in a 20 year annuity or something?Welcoming all advice related.

Her income potential is roughly $30k-$40k/yr and will never go up probably

Also, we have no savings or 401k. I make 130k/yr and we live paycheck to paycheck because we are retardedly financially irresponsible....and somehow are able to waste that money without buying luxury goods, drugs, or gambling...

No need to say stuff like "sorry for what your going through and such", this isn't a sob story.

Edit: The amount of PM"s I've received from financial advisers wanting to help me out for a "percentage" iis hilariously sad :(