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When I filed my 2020 taxes, I realized how good/bad I did with my tax projections....

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  • When I filed my 2020 taxes, I realized how good/bad I did with my tax projections....

    This'll get populated over time I hope but I'm curious from members of the forum of what's typical. We all know getting a refund isn't good b/c it's an interest-free loan to Uncle Sam. I haven't gotten a refund in years and we usually owe between $2-$3k when we file. Looks like my preliminary numbers are showing that'll happen this year too.

    Bonus (and this is just for me to brag): What's the smallest amount you've ever owed, so you never gave an interest-free loan but you also barely had to pay Uncle Sam? I'm not sure I'm going to beat our 2018 return where we owed $183.
    42
    Refund of over $10,000
    19.05%
    8
    Refund between $1-$10k
    19.05%
    8
    Owed $1-$5000
    33.33%
    14
    Owed $5001-$10k
    7.14%
    3
    Owed over $10k
    21.43%
    9

  • #2
    Good problem to have, but my tax planning has lagged income increases last couple of years, so I have owed more than a typical amount in prior years. I finally just stopped trying to optimize the W4 and started adding withholding by dollar amount. I’ll be interested to see how close I came in 2020 because I added a side gig last year.

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    • #3
      Even the best laid out plans can fail with a one -off thing- TLH can automatically save your marginal rate off of 3k for instance- cant really plan for that. I check the w4 withholding calculator a few times a year to keep my wife and I within 1k owed. A few extra unexpected shifts also sometimes mess it up, but hey, more money!

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      • #4
        I base my quarterly estimates on effective tax rate from the past few years and just save that % every paycheck...then when 4th quarter rolls around I see if my total federal payment is on par with the year prior and plan the Q4 payment accordingly [I generally end up shorting Q4 it because I tend to overpay just a little earlier in the year].

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        • #5
          No allowance made for safe harbor approach. You might owe a ton. Better metric would be how close was your total estimate, not the balance/

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          • #6
            As a sole proprietorship, overpaying in January to only get it back in Feb or March is a pretty wimpy loan to the US government. I use the 110% safe harbor rule. In the past I start doing some estimates in early January to cut the the q4 Jan payment but I didn't get my act together this year. I blame covid...

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            • #7
              Originally posted by billy View Post
              Even the best laid out plans can fail with a one -off thing- TLH can automatically save your marginal rate off of 3k for instance- cant really plan for that. I check the w4 withholding calculator a few times a year to keep my wife and I within 1k owed. A few extra unexpected shifts also sometimes mess it up, but hey, more money!
              I know I'm quoting myself->but just finished taxes, and I owe the US 2600 while my state owes me 1900. Not bad as I aim to owe 1 k per year.

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              • #8
                I'm just about done except a triple check. Looks like we owe $2700 fed and $1600 state. Looks like the main culprit is I underestimated by spousal income by quite a bit and I'm not sure how I was off by so much

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                • #9
                  dont even have 1099 for taxable account yet.....

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                  • #10
                    Originally posted by Peds View Post
                    dont even have 1099 for taxable account yet.....
                    vanguard's were online by the end of Jan. About the only online thing they are ahead of the game with I guess

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                    • #11
                      Originally posted by billy View Post

                      vanguard's were online by the end of Jan. About the only online thing they are ahead of the game with I guess
                      not brokerage.

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                      • #12
                        Originally posted by Peds View Post

                        not brokerage.
                        I agree with Peds that they are not all done. I have one brokerage account on Vanguard with the 1099's posted but not the other. Fidelity were supposed to be out today but now their site says check back on 2/27/21.

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                        • #13
                          we paid way too much.

                          always hard b/c my wife and i are both high earners with relatively unpredictable final incomes (extra calls, extra shifts, RVU components). i am actually surprised that we over-withheld so much but c'est la vie.

                          i definitely gave the gov't a large loan this year, biggest ever.

                          my goal is usually for my +/- to be <2% of our AGI and i'm usually there.

                          that said, likely that we'll make a bit more in 2021 (full year of RVU for DW) so i think i'm going to let it ride. but yeah this year i'm going to be acting like a much less financially savvy person and celebrating my big check from the IRS.

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                          • #14
                            I am also still waiting on vanguard. :/
                            ​​​​​

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                            • #15
                              Our brokerage 1099 from Vanguard was posted a week or two ago. I got notice that my federal return was accepted yesterday.

                              Due to DAF contributions last February and TLH, we itemized this year and are getting a big federal refund.

                              In a typical year, we get a few grand back. I guess I am risk adverse and would rather get a refund than risk penalties. I don't personally feel that a few grand in an "interest free" loan to the government moves the needle much for me. At least not enough to monitor W4 calculators and adjust withholding with HR through the course of the year.

                              Disclaimer: I actually am not sure how harsh those penalties are or how egregious I would have to mess up to even be subjected to one.

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