Hidden Tax Increases
Mar. 7th, 2022 05:40 pm![[personal profile]](https://www.dreamwidth.org/img/silk/identity/user.png){kind=small}
canyonwalkerI finished up my household's taxes this weekend. The last leg of my work was spending about 4 hours figuring out why TurboTax had my taxes $1,300 higher than my estimates and, if possible, lowering our bill.
The short version of the story is that TurboTax was right (this time) and we owe $1,300 more than I thought.
The long form is two things. First, the "abusive relationship" I've groused about having with TurboTax. The problem is that TT has been wrong a few times in the past, wrong to the tune of thousands of dollars. It's only through having spent significant time over the years educating myself on taxes and keeping an estimation spreadsheet that I caught these errors. And every single time TT has made it hard to check its math by.... well... hiding its math. Even though TurboTax's bottom line answers were correct this time, because of its occasional major mistakes in the past and persistent lack of transparency it remains an untrustworthy and thus abusive partner.
The second thing about that $1,300 difference is that it's basically a hidden tax increase. If you do your own taxes or pay attention to taxes you know there's the 22% bracket, the 24% bracket, 32%, etc. But computing your tax bill is more than adding up all your income, subtracting your deductions, and then applying the right tax brackets to the dollars remaining. Lurking within the tax rules are "phaseouts", countless little provisions it's hard to notice in the 100s of pages of instructions that say, "If you make more than X, go do this worksheet on page 37 of the instructions for form Y to see if your deduction of Z is limited."
This year we got bitten by 3 new phaseouts, one on our federal taxes and two on state. They weren't new-new; they've been there for a few years. This was the first year they applied to us. Yay, we earned more in 2021 than previous years. Boo, taxes getting more complex with hidden increases beyond the brackets.
The short version of the story is that TurboTax was right (this time) and we owe $1,300 more than I thought.
The long form is two things. First, the "abusive relationship" I've groused about having with TurboTax. The problem is that TT has been wrong a few times in the past, wrong to the tune of thousands of dollars. It's only through having spent significant time over the years educating myself on taxes and keeping an estimation spreadsheet that I caught these errors. And every single time TT has made it hard to check its math by.... well... hiding its math. Even though TurboTax's bottom line answers were correct this time, because of its occasional major mistakes in the past and persistent lack of transparency it remains an untrustworthy and thus abusive partner.
The second thing about that $1,300 difference is that it's basically a hidden tax increase. If you do your own taxes or pay attention to taxes you know there's the 22% bracket, the 24% bracket, 32%, etc. But computing your tax bill is more than adding up all your income, subtracting your deductions, and then applying the right tax brackets to the dollars remaining. Lurking within the tax rules are "phaseouts", countless little provisions it's hard to notice in the 100s of pages of instructions that say, "If you make more than X, go do this worksheet on page 37 of the instructions for form Y to see if your deduction of Z is limited."
This year we got bitten by 3 new phaseouts, one on our federal taxes and two on state. They weren't new-new; they've been there for a few years. This was the first year they applied to us. Yay, we earned more in 2021 than previous years. Boo, taxes getting more complex with hidden increases beyond the brackets.
