Entries Tagged 'Taxes' ↓

Yes I know there is only one week left, but it is not my fault that I am not done with my taxes.  It is really due to my ex-employer, and here is why.

Basically, I exercised my vested stock options when I left my last company.  Since the “market value” of the stock was more than my strike price I thought I might as well buy my shares.  This was all fine and dandy.  In the middle of last year the company issued a cash dividend on its shares, so I got a check for my shares.  That was also pretty awesome since the dividends covered about 1/3rd of the price I paid for the stock.

Now, since there was a dividend, the company issued a 1099-DIV for my taxes.  However, the funny thing is that they sent the 1099 with a letter that said that they OVERPAID dividends so there may be a corrected 1099-DIV coming in April.  I actually have never heard of this before.  So now my ex-coworkers and I are all waiting for this phantom 1099.

I am actually not quite sure what happens when a company overpays dividends.  They have not asked for any money back, but it seems that they have to account for the dividends a little differently on the 1099.  Does anyone know what is supposed to happen?

Anyway, since I do not have a tax refund, I am willing to submit my tax return as late as possible, but some ex-coworkers who are expecting returns are not so happy  about what is happening.  Private company stocks are really mysterious things, and I cannot find too much information. It is possible that I will just have to file and send in an amended return later, but it sure is annoying.

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The last two weeks have been incredibly busy for me because the entire engineering team was working on an important major release of our software. We all worked multiple weekends and nights and finally the software is out! As a reward we got to have five days floating holidays for the extra time we worked. I am taking one of those days off today just to unwind a bit, and also work on our dreaded taxes.

I already entered our W-2s and 1099s into the tax software and it looks like we owe quite a bit of money. The reason is that we adjusted our W-4 from single to married at the end of 2007. Strangely enough, this made our paychecks bigger for the duration of 2008, but we actually owe more taxes than when we were single because of the marriage tax penalty. Basically, we withheld less, and we owe more. So we may owe $4000 to $6000 for last year. This is not that bad because we actually needed the cash during the year to complete the home purchase. We also have the cash to pay for the taxes so it is not a dire situation. From my calculations we should be fine with the same W-4 status this year because our mortgage interest deduction will be around $6000 for the year and it will basically be a wash. Last year we only made two mortgage payments and a couple months of property taxes so the deductions are not very large.  I think the optimal thing to do is to owe a little bit of money every year in case the government needs to give out an IOU.

Nevertheless, paying taxes is always pretty depressing. I did a bit of math yesterday and our biggest monthly expense is actually our taxes and that is pretty sad. In fact, the amount we are required to spend on taxes every month is more than our rent and food money. Ironically, all of this money is mostly wasted by the government on bailouts upon bailouts.

Additionally, I am not a citizen, but a  permanent resident of this country, but the IRS states that I should be taxed like any other citizen working here.  I am fine with that since I have the same work opportunities as citizens, but for me it is truly taxation without representation.

Anyway, I should pull out all my various tax statements now and start working.  This is quite depressing indeed.

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Today the Obama administration started the previously announced mortgage rescue plan.  I wrote a detailed summary of the plan on Wise Bread.  Simply put, I think it is a pretty ridiculous plan.  The portion for responsible homeowners to refinance was already in place.  I can prove this because I got approved for a Fannie Mae streamline refinance in January before the plan was even announced and there was no appraisal at all on the refinance which means that they did not care about the loan to value ratio.  The new stuff is all in the incentives for modifying loans for people who cannot pay their obligations. So basically if you have good credit and you have been paying on time you are just stuck with higher tax bills to fund the program for people who has not been filling their obligations.  Great deal.

Anyway, I was going to write a pretty long rant about the new gargantuan Obama budget, but this article at American Spectator called Obama’s Fantasy Budget by Peter Ferrara  said a lot of the things I wanted to say.  Here are some of the main points in the article that  I was going to write about:

• Obama is raising the budget from $3 trillion in 2008 to $4 trillion in 2009.  This is a 25% increase.
• Obama is growing the national debt by $2.7 trillion this year.  This is a growth of 27% in one year over the collective debt of the United States for the past 200+ years.
• The deficit for this year is the largest ever at $1.75 trillion, which is more than 12% of GDP.
• Obama pulls out a nebulous $2 trillion budget cut over 10 years for winding down the wars, but this is barely half of his first year’s budget.
• Obama is keeping his promise of raising taxes for high earners, and also trying to limit the deductions they can take.  The money will be used to give refunds beyond what some tax payers pay.  Basically, a good amount of people could be paying no taxes and receiving extra tax refunds.
• Increased taxes on energy companies will creep into consumer energy costs.

The funny thing is that Obama said that he is going to cut the deficit in half in four years.  I wonder if he means he will cut the deficit he creates.  The bottom line is, a bigger budget is absolutely not a better budget.  It is incredibly difficult to create a budget for an entire national government, but the sheer size of the government allows the president to find more areas to cut.   The problem is that I do not think a small and efficient government aligns with the Obama administration’s agenda.

Finally, all of this money is not free.  It will come from the backs of Americans in one form or another.  Even the poorest who will get tax rebates will be affected in some way either through higher prices or less employment due to higher business taxes.  The deficit also indicates that the government cannot collect enough tax revenue, so don’t expect the tax hikes to stop at those who earn over $250,000 a year.

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Apparently, as part of the new budget that increased taxes on everyone there is a tax credit for people who purchase brand new homes.  This means that the home cannot be occupied previously by anyone.  This seems like it would be a boost to home builders.

Here are the specifics:

1) The home has to be brand new, but the tax credit applies to all buyers who intend to live in the home.  You do not have to be a new  homebuyer to qualify.

2) There is no income limit to qualify for this tax credit.

3) You have to close escrow on the home between March 1, 2009 and Feb 28, 2010.

4) There is a total of $100 million assigned to this credit, so that means only 10000 homes will qualify.  It is first come first serve by closing date.

5) You have to live in the home for at least 2 years and you will receive the $10000 in 3 installments of around $3,333 each for the next three years.

6) This tax credit can be combined with the Federal Tax credit of $8000 for new home buyers.

This tax credit actually makes me quite angry because right now California is not even paying tax refunds to people who qualify.  Now they want to use all this extra money to help home builders sell homes?

Additionally, there is a very small supply of new homes here in the Bay Area so I do not see this helping many people here.  This is definitely beneficial to some friends we know in Southern California, where the markets have a glut of new homes that are not selling.

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Just when I thought that my husband and I have been paying too much taxes, we are having another tax hike in California.  This is a basic run down of the new taxes.

•  The vehicle licensing fee is doubling to 1.15%.
• Sales tax is going up 1%, which means in San Mateo County I will be paying 9.25% on services and non-food goods.  So guess what, my hubby and I will probably shop more on Amazon for the non-essentials.
• Income tax is going up by 0.25% so the top bracket is now 10.55% for those making over $1 million per year and 9.55% for everyone else.    For the hubby and I the extra amount we will pay is just under  the paltry  stimulus package we are getting from Obama.  So our net stimulus would be around 50 cents a week.  Haha!
• The dependent tax credit is reduced by $210, so families with tons of kids will see a hit in their tax bill.

It is unfortunate, but this state has way too much debt and something had to be done.  Raising taxes is a almost inevitable.  Supposedly these tax hikes are temporary for two to four years, but the economic crisis might make them permanent.

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