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Powered by LifeTypeI haven't looked at how much time it took us to do taxes this year - I thought we were doing pretty well, time-wise, until we blew 8 hours or so today finishing them off (or is it them finishing us off, I'm not sure which...)
I noticed a number of places where the strange, complicated math formulas to figure out different values seem to be kind of odd (ie. not just complicated, but don't calculate in the intuitive way for people at different incomes, etc.) The child credit is biased against self-employed people for some reason, where you can hit a cap relatively quickly, where if you work at a regular company, the cap is much higher (and at least for one guy (with a relatively low salary as a teacher with lots of kids) I asked, impossible to hit - he actually didn't know there was a cap).
There is also a minimum to getting the child credit, which I hadn't realized. Once you have three kids, then that limit is mostly removed (though you have to work at the calculations to figure out how much you actually get), but with only one or two kids, you can actually earn too little and not get any tax credits for your children. One could argue that if you are earning small amounts of money (or at least have a small adjusted gross income) that perhaps you can't afford lots of kids, and so shouldn't have the tax credit to motivate you, but I don't know how much people think about the tax credit when thinking about having another child or not.
Another interesting thing that happened this year, though I suspect it is mostly our "fault" due to not giving as much, is that though we earned a little over half what we earned last year, the actual tax rate is higher this year due to the self-employment chunk being bigger. Last year, we were in the 15% bracket, and "actual" taxes were 9%. This year, we're in the 10% bracket, but actual taxes are 13%. I am defining "actual tax" as taxes paid divided by gross income. (actually, I didn't do the calculation this year, taxact happened to point out that I was paying a higher tax rate than last year, I guess just to cheer me up) But, the numbers sound right for last year, when I did do that calculation, and I'm pretty sure I used straight gross income.
TaxAct also pointed out that 13% of my taxes went to pay for other people's social security and medicare, etc. 9% went towards the US defense fund. And then the rest of the categories (probably about 8) were all small percentages. Just gives you a warm, fuzzy feeling, doesn't it?
Delaware is very tax friendly, so lots of companies are incorporated there. I am not exactly sure how that works.
Portions of Microsoft are incorporated in Ireland and Nevada, (and they ship things to the US from Ireland), which I assume is for tax and also patent/licensing reasons.
Here's a little more: Why incorporate in Delaware?. Looks like you can set up a business in Delaware, do your business outside Delaware, and only get taxed on the income earned in Delaware. And nobody knows who owns the company, so I suppose it's a good setup for holdings that purvey cement footwear in other states, for example. Or just people who want to hide their money from their government.
That brings us to the philosophical question of whether tax havens are a boon because they create tax competition and hence an incentive for cheaper and perhaps more efficient government, or a danger because they allow the sneaky (and usually the sneaky rich) to benefit from their home country's services while evading the taxes that fund them.
Yay, just talked to Middlesex Twp, and the only two taxes they impose on people is a $52/year "services" tax, and the 1% income tax, so we won't owe another 1% for a business "privilege" tax (like Pittsburgh does) and what I thought I might have seen on the website.
We do still have to calculate Pittsburgh's payroll tax each quarter, which would be a maximum of $9 or so each quarter, but takes around 10 minutes to prove that we owe $0 since we don't take money out of the bank that often, and the income earned in Pittsburgh is rather small. The tax guy said that if it was easiest, we could just pay the full amount on gross income and not calculate it, but of course, that helps his paycheck, so he would think that a good idea...
My employer is now withholding local taxes for Moon township, even though most of us don't live there. When we asked them to stop, they refused. Instead we have to file a form at the end of the year with our own locality to have the money transferred. (Meanwhile I guess I'll have to convince them not to fine me for not making quarterly payments, or make the payments and get a refund later. Ugh.) It seems it is optional now, but will be mandatory in a couple of years, for employers to withhold local taxes even if you don't live in the employer's locality.
I think you'll have to make quarterly payments, unless that transferral thing works, I've never had to do that.
I read somewhere about the withholding thing, but I thought the townships were making companies withhold the correct amount, and send it to the right place, rather than withholding the wrong amount and sending it to the wrong place.
Probably no one files the local taxes, so the townships were getting tired of not getting the money they "deserved".
From a business standpoint, it is hard to figure out what taxes they want to collect, so it is fairly understandable when townships don't collect the taxes appropriately.