What is your tax %?

J

JohnnyM

2,500+ Posts
Not bracket. What is your federal+state liability as a % of your gross pay?

I got married in 2008 and we started a new company...and thus we are paying taxes on a lot of company income that we didn't actually get, but this is a f'ing deathblow to our savings.

We're going to end up paying ~40% of our actual gross pay and about 32% of our actual "income", including the company profits that we didn't take out. That hurts.
 
Mine is too much, I am looking forward to cap gains taxes going higher as well. But don't worry, we all are going to get a lot of free stuff from your taxes. Even better if you reach the 250K threshold.
 
Rex - Why would you say that? Certainly it hurts, but just as when my personal finances are in a hole I have to figure out how to make more $$, so does my country.

It sucks certainly, and it's not fun, but don't expect that my large tax bill is going to drastically alter my politics. I'm not in it for just me, that's the difference between us.
 
We need an across the board 10 to 50% spending decrease this year to reduce the deficit.
 
Rex - Then don't come into a thread of mine on Horn Depot asking to compare notes about tax rates and turd it up it with political ********. Deal?
 
Your problem Johny is that you don't have enough kids.
tongue.gif
They're great tax deductions.
 
If you didn't pull the profits out of the business, did you buy anything with it or just leave it as cash?

If you left it in as cash you would have to pay taxes, but usually people leave profits in to buy stuff which they can claim as an expense and not pay the taxes.
 
Speaking of taxes, I'm a teacher/coach in high school here in Texas and married. I have always gotten back approx. $2000 or more back from the government when filing jointly. All of the sudden this year, my return reads $327. What the hell happened? Also, I am paying a mortgage which didn't seem to help much.
 
Sounds high to me? How is your business structured? Did you not get a **** pile of writeoffs from the business startup year? the laws recently were such that you could deduct a mind numbing amount of expense in the first year of your company.

I assume you were forced to pay tax on the income and you chose to simply leave it in the business for operating capital? Seems like there are ways that number could have been cut.
 
There's not a whole lot of start-up costs because we office from home and didn't really have to purchase any assets. We are a drop-ship wholesaler of shipping supplies...basically just a broker/middleman.

The confusion right now is whether we are required to use the accrual accounting method or if we can use the cash method. Of particular interest is whether or not we really have "inventory" since all orders are shipped directly from the supplier to the customer and we never take delivery, never have title, etc. I am curious to know if the IRS has ever issued a statement with regards to people who have Ebay drop-ship businesses and what method they have to use, because that is a similar situation in many respects (especially "inventory"). Have searched far and wide and cannot find anything definitive (not really surprising).

I know in the end we're not avoiding any taxes and we're not trying to do that...but if we use the accrual method we are going to be forced to pay tax on a lot of income we didn't get in 2008. We're more than happy to have a much larger tax burden in 2009.
 
I think you can use cash- nearly for certain.

You do not carry any inventory if you drop ship directly, is and always has been my understanding. You do not accept inventory and then reship you ship directly. Unless you are a corporation then you should be able to go with a cash basis accounting.
 
Summer - I hear you and hope that's what it turns out to be. The water is further muddied by the fact that we offer payment terms and have sometimes large AP and AR balances, and the fact that the IRS generally feels that all wholesalers must use the accrual method.
 
It pays to read the 1040 closely. One year while we were living in an apartment, I was doing the taxes, and I ran into this thing called a Mortgage Credit Certificate, which is a tax Credit, not a deduction. Researched it, found out we could qualify, jumped through the incredible hoops, and got it!

This was in '04, the credit is 40% of the interest paid annually, up to a maximum of $2000. Since then they have lowered the percentage of credit.

Since my credit percentage is so high, I'm looking at a $2000 tax credit for the next 10 years or so.

After that it will slowly go down, but, as an example, last year we had $0 liability, this year $1000, next year will probably be around $500-700.

Two kids helps. So we start every year for the next few years with $4000 in tax credits.

This is on a combined gross income of the low to mid $60s.

Now property taxes, that's another matter. $3400 a year is nothing to sneeze at.
 
Tax | Total Tax $ 12,492.00Return | Total Payments/Credits $ 22,634.00
Summary | Amount to be Refunded $ 10,142.00
| Effective Tax Rate 10.82
 
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