Holy Sh… Estimated Taxes… WTF… as a Married Couple

Getting married is wonderful for so many reasons. Taxes is not one of them. Besides the horrific marriage fine levied by our tax lords if you happen to want to be an independent woman and continue working post tying the not, there’s also a whole host of tax intricacies which suddenly make TurboTax no longer a viable option and accountants your new BFF.

My husband is an independent contractor.  He usually makes anywhere between $80k and $110k per year, depending on how business is going. As a single person, he was able to take advantage of safe harbors designed to protect self-employed folks from overpaying taxes to avoid fines for coming short on estimated tax payments.

Safe harbors for estimated taxes for single, self-employed folks basically say that you can either pay 90% of your current year’s eventual tax bill OR 100% of your prior year’s tax bill. As a single person, this is pretty easy to figure out — even if it’s hard to guess what 90% of this year’s tax bill will be, you can pay 100% of your prior year’s tax bill and know you’re safe from fines, even if you end up owing more at the end of the year. If business isn’t going quite as well this year, you’ll get a refund, and you’ll give uncle sam a loan for a while, but it won’t be that bad.

Of course, getting married makes this all sorts of more complicated, requiring expensive accounting help to make sense of this mess.

Estimated tax safe harbor for higher income taxpayers. If your 2016 adjusted gross income was more than $150,000 ($75,000 if you are married filing a separate return), you must pay the smaller of 90% of your expected tax for 2017 or 110% of the tax shown on your 2016 return to avoid an estimated tax penalty.

Thank you IRS for an explanation that is not clear at all. It sounds like if your AGI is over $150k as a single OR married person you are considered a higher income taxpayer. This means Mr. HECC would not have been considered a high income taxpayer as a single person, but now that we’re married we’re well over $150k and he can no longer use the safe harbors for his estimated taxes.

Instead, we have to pay 110% of our 2016 taxes (including my taxes) in order to not get penalized this year. Suddenly, my W2 withholdings are no longer an annoyance of over or underpayment to the government, but they can result in substantial penalties.

So – we need an accountant, stat. I consider myself fairly financially literate and the IRS explanation of all of this is the most confusing thing I’ve ever read.

Are any of you married with one partner earning W2 income and the other self employed? How do you manage your estimated tax payments?

What Does it Take To Be Successful in this Business?

Removing myself from the equation, I ponder what persona would be successful in a role like my own. I seem to care far too much personally about everything I do, which renders my work occasionally high quality but too often belated.  The quality, the “artistic merit” of the work is not valued – only its completion, it’s project management of other people playing their parts and getting their projects done faster and more effectively than anyone else, or at least making it seem that way while in reality surviving on little sleep to make sure everything gets done and no one has to ask twice regarding the whereabouts of a deliverable.

It’s the alienating daily experience of being an “NFP” in a strictly “NTJ” world… welcome to Silicon Valley, oh sensitive artistic one.

Everyone appears to be satisfied with this world, stressed, maybe, but focused, determined, and given those drawn to this industry are the types who always got A’s on their exams and submitted every last ounce of extra credit assignments possible, I feel like a complete outsider. I’ve never actually fit in anywhere, so the outsider role is at least my status quo. As I observe those in the world around me and age in the industry where I’m no longer the youngest in the room (now, far from it), I feel even further removed from the center of gravity here. I’m off kilter, wobbling about and hoping no one notices I’m slipping sideways, that is, until the inevitable face plant. Continue reading

Time to Move On… But Where To Go?

I thought maybe, just maybe, with a new boss and a more focused role I’d be able to keep my head down and get my shit done and I wouldn’t be a total train wreck. I knew that was highly unlikely, but the hope was there.

The historical self-sabotage rears its ugly devil head yet again, and I’m on the fast track out of this org, as soon as my superiors have enough documentation on the things I do wrong and enough new resources to manage the pieces I still run so nothing so much as briefly falls apart in my absence. The clock is ticking and soon my time will be up. Continue reading

Our Marriage Tax Penalty: How It Played Out

There is a lot of misinformation about the marriage tax penalty. While it’s true if one spouse doesn’t work and the other makes any amount of income, the couple will get a “marriage bonus,” once both partners are working and making enough income to live, esp in a high-cost-of-living area, the tax penalty is going to kick in.

The worst marriage penalties are seen when you have kids and lose deductions based on income, but I’m going to share in simple terms why we received a marriage penalty this year – this beautiful first year of our marriage – due tour income.

Federal Taxes Only (State marriage penalty not included below)

Mrs. HECC
Income: $195,000
Single Filer Tax: $47,749.25

Mr. HECC
Income: $105,000
Single Filer Tax:  $22381.75

  • Total Couple “Single” Federal Tax: $70131
  • Married Filing Jointly Tax: $74,217

And, just in case you’re wondering, it is not better to “file separately” as a married couple — this is not the same as filing single (which you can’t do when you’re married.)

Married Filing Separately:

Mrs. HECC

Income: $195,000
Single Filer Tax: $51,958.50

Mr. HECC
Income: $105,000
Single Filer Tax:  $22981.25

Total Married Filing Separately:  $74939.75 

As you can see, if you have somewhat higher incomes, the marriage tax penalty will be quite notifiable.

If we never got married… $70,131 in taxes
Marriage Fine (Filing Jointly)  +$4086
or, Marriage Fine (Filing Separately) +$4808.75

This plays out similarly in state taxes.

Yes, we’re fortunate enough to be high-income earners – but we also cannot afford a house. So there’s that.

 

Are 401k Accounts a Scam?

I’m no financial expert, but I try to follow the basic principles of investing and retirement savings in order to hopefully not be dirt poor in old age. One of these principles has been to consistently max out my 401(k) each year, which I’ve done faithfully now for many years, ever since I finally had access to a retirement account at work. As soon as as started making too much money for a Roth IRA, I socked away $18k a year in my 401k… and now, between all my pre- and post-tax retirement accounts, I have about $235k locked away, compounding over time.

However, after reading more propaganda on 401k investing, I started to suspect something fishy is up. Most of the anti 401k content focuses on issues with high fees — which, indeed, are a big problem with 401ks. But, really, the most suspicious piece of messaging out there on the benefits of the 401k is that you don’t have to pay taxes now so you get the “benefit” of paying them later. Continue reading

Thinking About Retirement Savings… as a Married Couple

My husband and I have very different financial philosophies. He spends very little and keeps his savings in a bank account. I spend too much but given my income have managed to save quite a bit — and I aggressively invest my savings in index funds, stocks, and alternatives.

Together, we have about $550k in savings, with $443 of that in my investment accounts ($235.5k in retirement included in that), and about $100k in his bank accounts. Over the last few years he has been investing in a Roth IRA, so he probably has about $10k in retirement savings to his name. As a married couple, he’s no longer eligible for an IRA, and he is an independent contractor, so I’ve done some digging into how he can increase his retirement savings, you know, before we retire. Continue reading

Thoughts on the Marriage Tax Penalty, Now that I’m Married

Unlike many unsuspecting newlyweds, I was well aware of the marriage tax penalty long before I got married. It seemed like a cruel joke that the tax brackets were different for married couples than singles, and that once married you no longer could file as a “single person.” There’s plenty of publicity around the “marriage bonus” but this only applies if you have one working person in the household. If both partners work and make about the same amount of money, you end up screwed.

I got married anyway.

The marriage penalty impacts different classes in different ways. The worst impact is on lower income couples who end up phasing out of tax credits and other benefits such as healthcare allowances if both partners work, even if together the couple is still together earning at poverty levels. For middle income couples in high-cost-of-living areas, the $1k-$10k+ that has to be paid to the government just for the privilege of being married is significant. Is love worth that much? Continue reading

Not Pregnant.

It’s that time. Time to get serious about having kids. All the tests have been run and so far we’ve found I don’t ovulate on my own and I have a minor case of hemophilia C (no big deal, mostly it’s just a gene thing.) I’m not ready to have kids (or, kid) but I’m as ready as I’ll ever be. Right now, with my “$500k before kids” goal in sight, I’m turning my attention to the most important part of a “having kids” objective: getting pregnant.

My doctor put me on metformin for my PCOS, which doesn’t fix anovulation but it can regulate cycles which potentially could increase ovulation frequency should it actually be happening ever (infertility doc explained that even women who don’t ovulate might – sometimes – ovulate. You just don’t have any idea when so it’s pretty hard to get pregnant (you have 48 hours so around this time to make a baby, and you don’t know when it is, so, you can do the math.) Continue reading

Exhausted and Fully Into That Next Phase of Life

Looking at the thinning skin on my hands, the creping around my knuckles and veins starting to show through my translucent skin not only in color but texture, I know I’m well into adulthood. My wedding earlier this year was a bit of a shock as it was the end of a prolonged young adulthood, years of being stuck in that obligatory urban millennial purgatory of minimal responsibility outside of paying one’s bills and getting a modicum of sleep every night.

Then, poof, I’m a married, working women with no more childhood romantic notions to play to, no more weddings to plan, no more wonderlands to chase. Not yet a mother, but the same age of many peers who have children approaching puberty, I am still childfree and tired nonetheless from stressing out epically over job after job where I can’t quite perform at the level required for success, only relentlessly tread to try to stay above water. Continue reading

The Comedy of Attempting to Find an In-Network Therapist

Depression isn’t like cancer. There’s no scan you can get which spots a tumor and clearly requires treatment. It sits with you for years–on a good day you may not even remember you have it, then suddenly a dark cloud forms over your head and no amount of fun activities or success can shake you of overwhelming, suffocating sadness.

I’m fortunate enough today where I have health insurance that covers mental health–well, sort of. It is supposed to be $20 a session for in-network therapy, if only in-network therapists actually existed. I’ve written about this before, but after giving up on finding an in-network therapist I decided to try again. I pulled up my insurance company’s “find a provider” website and started searching names of psychologists both close to my house and my work, and put in a bunch of calls hoping one would actually be open and available at a reasonable time to meet weekly. Continue reading

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