If You’re Paying More In Taxes, You Might Get Little Sympathy

I read a post on another one of my favorite blogs recently that rubbed me the wrong way a little bit.  I’m not going to point it out because I don’t think the post was written with the intent to get anybody upset.  Plus, it actually dovetailed into some other advice that was practical and useful for many.   But it still gave me enough pause that I wanted to vent a bit.  The post started with the author complaining that he’s paying more in taxes than most.

Professional Blogger

Some background first.  The is a professional blogger who writes a lot about his profession.  I can tell that he’s very knowledgeable, and I would wager that he is very good and very successful at what he does.

As such, I think he probably earns quite a good living.  Which, just to make very clear, I am 100% fine with.  People that do good work and are compensated well for it, I really have no problem at all with.

However, where it went a little off course was that he just jumped right into the fact that he was paying a lot of taxes, and glossed right over what I consider the even more important part of it.  What’s that?  It’s simple.

He’s  paying a lot more in taxes because he’s making a lot more money.

Mo’ Money, Mo’ Taxes

See, when you shift the focus of the sentence, you could easily look at the “making more money” aspect, in which case, who would complain about that?  Nobody.  Nobody at all would complain about making more money, right?

mb-2015-06-chartBut, if you’re paying more in taxes, aren’t you, in essence, complaining about making more money?

Now, I know that tax law is complicated and there are tons of factors that go into what people pay, so I know that people can make the same money and pay wildly different amounts in taxes, and vice versa, but I think it’s a safe bet to say that someone who pays $5,000 in taxes is likely making a lot less than someone who pays $25,000 in taxes.

See, it’s all about perspective.  You’d probably never hear the person that pays $5,000 in taxes say “Oh, wow, I wish I was paying $25,000 a year in taxes.”  That would sound almost silly, right?

Would You Sacrifice Income For Taxes?

But, what if, for the sake of argument, the two were making $50,000 and $250,000 respectively.  Would you think it crazy if the person making $50,000 thought “I wish I was making $250,000 a year.”  Of course not, who wouldn’t want that?

However, aren’t they really saying the same thing?

Let’s face it, everybody would like to pay less taxes, sure, I get that, but in the roughly 20 years I’ve been filing returns, it’s a pretty safe bet that if I’ve paid more taxes versus the prior year that I’ve started off by making more money.  I mean, you can’t really have it both ways, so which way would you rather have it, paying more and making more or paying the same but foregoing your growing income?  That could very well be the easiest question ever asked on this blog.

So, the point is that people can complain about paying taxes, but in many cases, aren’t you potentially complaining about making more money?   Have you ever heard of someone making such a complaint?  Well, if you’ve heard someone complaining that they’re paying tens of thousands of dollars in taxes, you may in fact have.

The post could have been nullified a bit.  Perhaps  starting things off with “Our income was good last year, but even so, it still sucks paying $<amount> in taxes.”  Acknowledging the other side might have earned a tad bit more empathy from me, anyway.

Readers, what do you think?  Do you see complaining about paying more taxes almost as complaining about making too much money?

Copyright 2017 Original content authorized only to appear on Money Beagle. Please subscribe via RSS, follow me on Twitter, Facebook, or receive e-mail updates. Thank you for reading.

Top Things to be Aware of Before Filing an Tax Extension

The tax deadline is quickly approaching, but if you haven’t filed your taxes yet, then chances are you may need to file an extension instead. As such, there are at least five things you need to be aware of before you file your request.

You Can E-File Your Request

That is correct! You can skip the hassle that comes with filing your extension on paper, and file directly on your computer. E-file extensions are guaranteed to be received by the IRS within 48 hours from the time you file, and you receive an email confirmation once it’s been handled. Forget waiting in line at the post office or the hand-wrenching agony of wondering if your extension has been processed. E-filing is the smart choice.

Tax Extensions Can Be Denied

When you file your extension, be careful not to make any mistakes while filling out Form 4868. Small errors and inaccuracies are enough to get your extension denied by the IRS, and you’ll be subject to a possible failure-to-file penalty. That’s why it’s important to read carefully and take your time when filling out Form 4868. Rushing will cost you more money and add unnecessary stress to your life.

Taxes Must Be Paid by April 15th (April 18th this year)

While you can postpone filing your taxes to the IRS, you cannot postpone payment! The extension you are filing is only for your paperwork, not the money you owe the government. You will be required to send in your estimated tax bill along with the payment on April 15th. Non-payment will subject you to tax penalties and interest.

If you are unable to pay your tax bill, you may want to consider using an installment loan to cover the cost of your taxes. Installment loans are a safe, affordable, and can be repaid over time with a set number of payments.

You are Required to File Both State and Federal Extensions

If you are filing a federal extension, chances are you’ll also need to file a state extension too. The requirements to file a state extension vary from state to state, so you’ll have to find out the requirements by contacting your state tax authority. Some states provide their citizens with a six month automatic extension, while others require you to request it.

Deadline is October 15th

Once you file your extension request, you have exactly six months to prepare and send in your tax paperwork to the IRS. There are no exemptions, and no excuses if you miss this deadline once your extension is granted. October 15th is the deadline so mark it on your calendar and make sure you’ve filed your paperwork on or before this date.

If you are going to file an extension, it’s important that you be prepared. Be aware of the above information, and if you can file your taxes now instead of waiting.

Will you be one of the Americans requesting a tax extension this year?

Tax detail isn’t my area of expertise, so this was graciously contributed by a friend of Money Beagle.

Copyright 2017 Original content authorized only to appear on Money Beagle. Please subscribe via RSS, follow me on Twitter, Facebook, or receive e-mail updates. Thank you for reading.

What Might We Do With Our Extra Money?

Looking at our money and our budget, there are a few things that have changed over the recent months, and it will require some change in planning on how we approach our money.  One of the things we’ll have to look at it how we allocate extra money.

Where Is This Money Coming From?

Everybody will define this differently, but for us the extra money boils down to a few different areas.

  • Credit card rewards. Most of our spending is done on cash back rewards.  As such, we’ll have a few mb-201312billscoinshundred dollars in rewards after cashing in all of our rewards.
  • Tax refund. Last year we had to pay on our 2014 taxes.  This was largely because of a few things: I switched employers and our witholding didn’t cover us as well as I’d anticipated due to some changes in insurance coverages and such. We also realized some stock gains, and also cashed in some savings bonds that had fully matured.  In 2015, we should get a refund, as our withholding was adjusted, we didn’t do so great in the markets, and didn’t cash in any rewards. Our taxes are still out to our CPA, but a back-of-the-envelope estimate shows that we should get a couple of thousand dollars.
  • My wife’s side hustle. My wife runs a really cool shop on Etsy where she designs custom invites, thank yous, wall arts, and similar products.  Up until recently, pretty much everything went to funding our recent Disney World trip.
  • Pet expenses. Our cat recently passed.  We are going to give ourselves some time before even considering whether to get another pet.  Still, this will help our budget as his food, vet, and medicine bills were not cheap.

So, these are the four areas that we see working in our favor in terms of cash flow.  Some are one-time things and others will be more ongoing.

So, what to do? What to do?

A Couple of Needs, Some Wants, and Looking Toward The Future

Honestly, there are a few things that we will probably do with the money.  Not all of it is flashy, but it’s all (OK, mostly) helping us strive toward goals like saving for retirement, saving for big purchases, and being able to do enjoyable things without taking on debt.

Here are a few ideas about our extra money.  The splurge type stuff first:

  • New wireless router. Typically our credit card rewards money has funded our purchase of new electronics .  We’ve purchased all of our TVs with new flat screens by using credit card rewards.  Along these lines, we’re looking for a new wireless router.  The one we have now is at least 7 years old, doesn’t provide the latest security, and the coverage kind of stinks compared to what’s available today.
  • Vacations. Even though we aren’t piling as much into our travel fund as we did to fund our Disney trip, we’d still like to take a family trip every couple of years.  We liked Florida and have never taken our kids to the beach, and so we’re considering saving a smaller portion of my wife’s business toward a trip to the Tampa / St. John’s Pass area.
  • Other travel. We do most of our traveling with our RV.  Every couple of years, my wife and I like to consider a small anniversary trip in the fall.  These aren’t extravagant or largely expensive, but stashing a few hundred bucks goes a long way.
  • Entertainment. We both used to be pretty frequent concert-goers but kind of stopped once we had the family.  We have done a few concerts and really enjoyed it, so we’ve decided to try to do 1-2 concerts per year.  Putting some money toward a specialized entertainment fund is a good goal that will let us buy tickets and a night out without guilt.
  • Furnace Fund. Last year we found that our furnace is starting to fail. We’ve taken some measures to slow this and are very carefully monitoring the device.  Eventually it will have to be replaced.  Continuing to save for this or other big purchases that might come up is important to us.
  • Retirement.  Bumping retirement contributions is never a bad idea.
  • Kids Activitie. We set aside money for some of the big things that our kids like to do.  Summer camps, swim lessons, dance lessons, etc.
  • Replacement Car / RV. We are proud that our two cars and our RV are from model years 2006, 2007, and 2004 respectively. However, the bottom line is that eventually they may hit the end of their useful life.  We save for this and could likely replace one without having to take on a loan.  With all three at that age, it could be that more than one would need to be looked at in a shorter period of time.  We will definitely be upping the allocation here.  We don’t want something to leave us unprepared.

So, that’s really about it.

Readers, I’m curious what you think of our plans for extra money?  Have you had any favorable (or unfavorable) budget changes over the past months? How have you worked to incorporate them into your spending plans?

Copyright 2017 Original content authorized only to appear on Money Beagle. Please subscribe via RSS, follow me on Twitter, Facebook, or receive e-mail updates. Thank you for reading.

Why We Pay Taxes

The United States of America is almost 320 million people strong. We live spread out across a diverse slab of land stretching almost 3000 miles across, not counting our noncontiguous states and territories. Our armed forces are stationed on 662 bases in 38 foreign countries and on 19 aircraft carriers traversing the high seas.  Why do we pay taxes? Because this stuff is expensive to maintain.

How expensive? Try almost four trillion dollars in 2015 alone. And that’s just federal spending. It’s a sum of money we can’t even fathom – is there even that much cold hard cash in circulation? At that level the individual dollar, and even the individual million dollars, is a fleck of paint on the Sistine Chapel.

Yet it all has to come from somewhere – mainly the fruits of hard earned income harvested at tax time. Griping about paying the government their “fair” share of our wealth is a human experience as old as the pyramids – which were surely paid for courtesy of the Egyptian taxpayer.

Any one of us can scroll through the paper trail of government spending and point out an example of hundreds of thousands or even millions of tax dollars squandered on some seemingly fruitless endeavour. We can all think of a few choice government programs and services we’d like to see slashed or obliterated altogether. However getting Americans to agree on which expenditures are the waste and which spending should stay is no easy task.

With all the billions upon billions of dollars being collected and spent every year we quickly take issue with the Internal Revenue Service when they chase after a few thousand dollars we may or may not have incorrectly reported. Can’t you guys pick on somebody else? But that’s a slippery slope. The reason so many people come running to a tax attorney or CPA is because nobody is immune from the hard scrutiny of government tax collectors. No stone is left unturned when the IRS comes around.

Most people don’t have a problem with paying taxes in and of themselves. It’s the prevailing belief we’re being taxed too much that drives most people batty when it’s time to send a check or two to Uncle Sam. Sure, we can agree that the interstate highways and FBI are necessary things to have around, but if we stopped providing welfare to couch potatoes or cut back on our military then I’d only have to pay half as much, right?

Makes sense, but who are we kidding? These sorts of sweeping slashes and changes to mb-2015-06-irsgovernment spending would probably create new problems. Many of the couch potatoes forced to work would get a job, but many others would turn to the easiest way to make money: crime. The military would cut back, but then a decade later our more powerful enemies would surely find a new way to poke and provoke our interests overseas. The only agent capable of fixing these kinds of problems would be the government. How would they go about doing it? Who knows, but one thing’s for certain: they’d raise taxes before getting started.

We pay taxes because we have to. It’s the necessary evil of civilization. There will always be waste. Taxes will always go up more than they go down. We will always feel like we’re not getting our money’s worth from the system. But in the end it’s the price we pay. All things considered it’s a small price to pay for the benefits of living under the largest government in human history.

Readers, while certainly nobody enjoys paying taxes, do you think our current system and rates are where they should be?

Copyright 2017 Original content authorized only to appear on Money Beagle. Please subscribe via RSS, follow me on Twitter, Facebook, or receive e-mail updates. Thank you for reading.