I do, "well" financially. Even have productive stocks. Never once paid to the IRS. What are you guys doing wrong?

 

Probably claiming all dependants through out the year and not putting enough 401k away. I always claims 0 and me plus the now "ex" get back close to 8k but we have 2 kids. Houses help too.

 

I claim 0 too. Without the wife's income, the house and the kiddo we get money back now. Next kid will help too.

Past years we have always had to pay at least $3k

 

My goal is to either pay/get back less than $100 either way at the end of the year. I don't like giving away interest-free loans to the government, and I don't want to owe a crazy amount, either. It's only now that I'm in school that I am getting $$$ back every year. It's nice until I remember how much my tuition is costing me.

 

I changed my withholdings back in...'08 for that very reason. I don't recall who told me that, but when they explained that I was giving Uncle Sam and interest free loan, I decided to keep my money.

Of course it's still kinda depressing when I only get back $49 a year.

 

Once you get to a certain income level. You get zero deductions for kids, education, almost nothing. Except your interest on a home, and taxes, charity donations and business expenses.

I don't mind paying taxes to some degree, to pay for my freedom here in America.

I just wish everyone paid the same percentage. I hate paying 2 to 3 times more as a percentage.

 

Anyone have a few pointers as far as managing taxes go for a new graduate in the $65k-70k range?
What should I be doing to minimize taxes at the end of the year?
What is a good percentage to set aside for savings vs setting aside for retirement investments, etc?

-Acree

 

Max out your 401(k) contribution
Max out your IRA contribution

As a rule of thumb you want to build savings up to the point where you have 3-6 months living expenses available. Anything beyond that probably makes sense to put into some kind of investment vehicle (since return on savings is essentially slightly negative).

At your age (making an assumption since you mention new graduate), though, I'd recommend putting 2/3rds of your monthly savings/investment holdback toward the investment side. Odds are you'll not need to have the large savings reserve immediately, and the time power of the set aside investment is tremendous when leveraged from an earlier age.

 

While no AMT in my taxes, I did write Uncle Sam a check yesterday for the price of a used Evo.

 

What are you doing wrong is the better question

I get paid out of the business without taxes withheld (distributions) so I have to pay tax on those. I'm supposed to make 1040-ES payment, but f' them (and yes I pay some penalties). I do get taxed at a lower rate (no FICA/SS etc on the income that comes in that way - and the business doesn't have to pay their ~8%).

All you guys getting multiple k back need to adjust your W4 with HR. You're giving the IRS an interest free loan. Unless you're poor and you're getting EIC, etc. then you're getting YOUR money back that YOU paid in... not free money from the Treasury.

-- Acree

Depends on your industry. I have close to a year of expenses in semi-liquid "storage" because I've been self employed for so long I know that when a drought hits it can hurt really bad. I'l disagree with mrMTB though and say that at your age, putting $$ into savings is doubly important. Once of my partners lost his job about 10 years ago and is still carrying some debt from that period in his life (of course a lot of that is due to poor decisions he's made along the way).

mrMTB must have a short memory My 401ks and IRAs have just recently rebounded from the absolute slaughter that they took over the last 5 years or so. I should have moved a lot more into the 6.25% CDs I got... but sometimes you gamble wrong.

I'm sure Chris can talk to how the little guy in the market has a very, very small chance of being successful and if they are it's either dumb luck or them working their *** off. The MM and other bots will pancake your $10k in no time flat.

 

I'm fine that you disagree, Sean, but the reasoning is sound. Acree's goal was to manage his tax burden- quickest and easiest thing to do is minimize the amount of income that is subject to taxation. Savings does not accomplish this.

I'll also point out that my memory of the crap the market went through is just fine, thanks. I upped my contributions when it was falling so that I could take advantage of the increased buying power of my $ in the market. Some of them are still down, but chances are they'll recover, and I'll be in a much better place when they do.

 

How the heck did you get 6.25 CD?

 

I work on a 1099 contract...

this year I owed $18k up from last years $12k. Part of the high tax bills is that I pay SS directly, and I have no withholding on a 1099. And to top it off, since I don't have a mortgage anymore, had no deductions. With the crappy economy I have not been able to make my quarterly tax payments, which just means you pay a little more at the end of the year. All of this is before AMT kicks in. If my income increases back to my normal wages, then I am expecting to pay AMT next year which means a total estimated fed tax bill of $25k or more.

I planned for it, but I didn't anticipate fricken $18k in federal taxes only.. State taxes were within my estimates.

At least the IRS is easier to deal with than a collection agency. You just don't want to break that initial deal, then the IRS is a ***** to deal with. But be careful, you can settle on an agreement that will actually increase the owed balance if you are not careful, like paying too small of a minimum payment.

 

max out your 401k deduction and buy a house if you think you will be there a while.

 

Andrew, maxing your 401k is great advice. If you can afford to dump 17k into that then by all means do it. At your stated income level the only thing you can do to lessen taxes is charity donations, or a home purchase.