Before I was laid off from my job last July, I made about $30,000, which was taxed. I then collected $7500 in unemployment for the next 4 months, untaxed. The last month of 2012 I worked as an independent contractor and made about $4000, also not taxed.
I also bought and sold a house last. I plan to itemize and claim abt. 14,000 in charitable deductions. I usually do my taxes myself but might go to an accountant this year, though I really hate to spend the money. The self-employment tax is a little confusing to me. I am single with no dependents. With this information, is it possible to determine if I will owe taxes this year? I certainly appreciate any help offered.
You need to put these numbers into a tax form and see what you get…
But, you are claiming $14,000 in charitable deductions? Are you itching for an audit?
Accountant. What do you mean by “owe taxes”? We certainly cannot tell if you are getting a refund, but still difficult to figure out the “Total Tax” line. I assume you’re allowed to itemize?
Independent contractor - often means you need a Sch. C. That is a red flag for needing an accountant. Do you have any work expenses? Start scheduling payments if you keep up that job.
Well, as someone who gets both W-2 and 1099 income, I can say that it’s possible not to owe any thing at tax time, if you “overwithhold” on your W-2 income.
But, if you didn’t do that, you will almost certainly owe tax on your 1099 income.
Note that you can deduct business expenses if you are self-employed.
I don’t agree that an accountant is necessary. The situation sounds not at all out of the ordinary; regular income, 1099 income and unemployment. No dependents, and it sounds like nothing too weird. In my experience, the desktop version of Turbotax (costing around fifty bucks) will walk you through all of that in a Q&A format in a few hours.
Awesome. Thanks for the help. I’ve always done my taxes the old-fashioned way (pen and paper) to save money but may try TurboTax or the free one. I do plan to put down all the figures and see how it turns out - I was just curious if there was a way to predict if I will owe money. That way I can do a little shopping tonight before I do my taxes on Saturday. Thanks again.
Honestly, there’s no way to predict if you will owe money, aside from actually doing your tax return. So the safest thing is not to do the shopping, or perhaps to leave the tags on the stuff so that you can still return it if it turns out you need to.
The missing piece of information is how much you have already paid via withholding and estimated tax payments.
You have a gross income of about $40K (unemployment comp is taxable). With one personal exemption (c. $4K) and the standard deduction (c. $6K), that’s around $30K AGI. Tax on that is around $4K.
(Your charitable donations are relevant only if all your itemized deductions add up to more than the standard deduction.)
If you have paid less than you owe, you will have to pay the difference, plus possibly penalties. If you paid more, you will get a refund.
Everything that you have mentioned will be handled easily by any of the commonly-used tax preparation programs. I second WhyNot’s recommendation of TaxAct.
I’m not sure what that situation entails, but I’m not a tax expert, just a tax-experienced (employer-side) software developer with a copy of Publication 17 to hand (IRS tax Bible for preparing 1040s).
Again, anything that lots of people do will be familiar territory to tax preparation software.
CPA checking in. Normal caveats apply, i am not your CPA, please seek your own tax counsel, etc.
We do need some more information to decide if you will owe and how much. Are you filing as single with no dependents? Did you work in a state that had income taxes? Did you have a mortgage and pay real estate taxes for the old or new home? How much federal and state taxes were withheld on your W2 income?
State income taxes withheld on the 30,000 W2 income count as an itemized deduction and can be added to your charitable, real estate taxes, personal property taxes, mortgage interest to maybe cause you to Itemize instead of taking the standard deduction.
Regarding the 4,000 you earned as an independent contractor - if you truly did not incur any expenses related to that job, then you will likely owe around 480 to 490 bucks in “self-employment tax”. This is in addition to any income taxes you may owe on that income.
Taking the worst case scenario, that you are single with no dependents and will not have enough deductions to Itemize, and do not have any “above the line” adjustments like student loan interest paid, for federal tax purposes only your total tax would be around 4700 to 4800 (that includes the SE tax). Whatever federal withholding you had on your W2 would reduce that, and the difference would be what you owe, or will be refunded.
State tax situations vary greatly between states, so will not comment on that.
Once again let me say that many things that you have not related to us could change the calculations above greatly, so take this only as a very rough estimate by an internet armchair accountant so please do not take it as gospel.
That’s not all he has. I have seen many people who said they didn’t need accountant screw up their Schedule C. The OP might be bright enough to figure it out but most people aren’t so an accountant is peace of mind. Figuring out Estimated Tax can be tricky. And then there’s always those questions like: “can I deduct this?” And charitable deductions? If they are non-cash, 8283 has to be filled out, etc.
There are free options through the IRS. I much prefer H&R Block’s to TaxAct or TurboTax last time I used them (might’ve improved since). Keep in mind that it’s not free, it’s “free.” You can prepare a whole tax return for free, but it usually costs to file in your state. Also, there are some restrictions on who can free file.
Just a quick question: Is this the first time you’ve ever collected unemployment? Because unemployment payments are most definitely taxable. You should have gotten a 1099 for your unemployment payments from your state’s Dept of Labor.
There is no such things as “not enough for capital gains” - I’ve had years where my capital gains is $5 - its still income.
You do pay taxes on unemployment income, but the government, in their wisdom, doesn’t tax it when they give it to you figuring you need all the money. So be prepared to pay that.
You won’t be able to deduct the commute from your self employment income, I don’t think so at least, it doesn’t sound like it qualifies. You are not driving from client to client. You have a single freelance job.
Thanks. I thought that sounded odd but didn’t bother looking it up. I guess there was an exemption for some of the income in previous years, but not 2012. Your unemployment may or may not be taxable by your state as well. One example is California; their return just takes the federal numbers and adjusts them, so they remove and don’t tax you for the unemployment portion.
Dangerosa, I believe at least in some states, you can elect (opt-in) to have withholding for unemployment. But most people are either unaware of it or unwilling to get a smaller check and don’t do it.
Thanks again.