Ugh, Taxes Just Got Done

[lovemykidstoo]

So... just finished my taxes and since we talked about penalties, I thought I'd update here.

My situation: Married, filing jointly. Spouse is a W2 employee. Did not pay any estimated taxes for 2018. Sold and bought a new home (some capital gains in there) with quite a bit of expenses for the daycare at the new residence. MN full year resident.

Federal: $80 refund
State: Owe $600 with a $5 underpayment penalty
::
First time that's ever happened.

I was surprised on all the changes to credits and deductions this year. But, I ended up not doing too bad since we usually owe Federal $500-$1000 in the past.

Oh my gosh that would be a dream. My husband is a W-2 employee, did have a carpet cleaning business that he worked very shortly and showed a slight loss on that. We did have a $8,000 write off debt with a cc company so we had to take a hit with that, but we owed the federal $3,900 and state $1400. I don't do quarterlies either. Am I doing something majorly wrong?

[storybookending]

You can get an underpayment penalty? What does this mean? I was under the impression that making quarterly payments was optional. I make them as I don’t want to be paying in 6K every year. My estimated payments were off and I owed like $1.3K this year and that was no fun but I don’t think I paid any penalties.

[BGM]

I'm so glad I'm not the only one who is majorly confused.

We're getting our taxes done tomorrow. I'm going to ask our tax person what I should have done last year/should do this year. If I get and good information, I'll let you guys know.

[MyAngels]

You can get an underpayment penalty? What does this mean? I was under the impression that making quarterly payments was optional. I make them as I don’t want to be paying in 6K every year. My estimated payments were off and I owed like $1.3K this year and that was no fun but I don’t think I paid any penalties.

Estimated taxes are definitely not optional. I don't like paying quarterly so I adjusted my husband's withholding to cover my taxes as well, but I still keep an eye on my income to be sure we're paying enough.

From the IRS website:

The United States income tax system is a pay-as-you-go tax system, which means that you must pay income tax as you earn or receive your income during the year. You can do this either through withholding or by making estimated tax payments. If you didn't pay enough tax throughout the year, either through withholding or by making estimated tax payments, you may have to pay a penalty for underpayment of estimated tax. Generally, most taxpayers will avoid this penalty if they either owe less than $1,000 in tax after subtracting their withholding and refundable credits, or if they paid withholding and estimated tax of at least 90% of the tax for the current year or 100% of the tax shown on the return for the prior year, whichever is smaller. There are special rules for farmers and fishermen, certain household employers and certain higher income taxpayers. For more information, refer to Publication 505, Tax Withholding and Estimated Tax.

[Daycarefamily]

t/s

mine was 37%. Everyone needs to read Tom Copeland's audit archives to see what gets you audited. Practice aggressive tax avoidance NOT evasion/fraud.

http://tomcopelandblog.com/irs-auditsdocuments

[lovemykidstoo]

mine was 37%. Everyone needs to read Tom Copeland's audit archives to see what gets you audited. Practice aggressive tax avoidance NOT evasion/fraud.
http://tomcopelandblog.com/irs-auditsdocuments

Is this in the Record-Keeping Guide?

[lovemykidstoo]

We're getting our taxes done tomorrow. I'm going to ask our tax person what I should have done last year/should do this year. If I get and good information, I'll let you guys know.

That would be great!! Good luck!

When I had mine done, I had these categories listed on my return:

Utilities (electric, gas, water)
Cable/Internet
Business Supplies/toys
Activity Expenses
Gifts
Household (paper products, cleaning, light bulbs, basically anything I bought for the house including towels, toaster, utensils).
Mileage
Property taxes
Daycare Insurance
House Insurance



Tom should I have more categories than this? Spread them out more? Is there any I'm missing that I could claim?

[TomCopeland]

time-space%

Is this in the Record-Keeping Guide?

There is a comprehensive discussion of how to calculate your time-space percentage in my Family Child Care Record Keeping Guide.

[TomCopeland]

expense categories

That would be great!! Good luck!

When I had mine done, I had these categories listed on my return:

Utilities (electric, gas, water)
Cable/Internet
Business Supplies/toys
Activity Expenses
Gifts
Household (paper products, cleaning, light bulbs, basically anything I bought for the house including towels, toaster, utensils).
Mileage
Property taxes
Daycare Insurance
House Insurance



Tom should I have more categories than this? Spread them out more? Is there any I'm missing that I could claim?

It doesn't matter what expense category you put your deductions in. Your categories are fine. However, you can also deduct: mortgage interest, house depreciation, repairs, food, furniture, appliances, etc. See my article for a longer list:http://tomcopelandblog.com/whats-ded...-care-business
My Family Child Care Record Keeping Guide lists over 1,000 allowable deductions.