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Good. Now.. Don't ask me about Estate Taxes, or Capital Gains or to define the Death Tax.
If you REALLY want confusing taxation.. Look up the "Donut Tax" in Canada. Working in the POS industry, I have to deal with that form time to time.. And.. Quite frankly, I'd rather eat a cyanide donut than deal with that again.
In my working years, whenever taxes were discussed, I was constantly amazed at the number of "adults" who had no understanding of tax brackets, or withholding taxes on bonus or overtime income.
Also pained me to see the 20-something wage earning renters paying the H&R Blocks to do their taxes every year. Once maybe OK, after that its "copy and paste". They just would not listen.
IMHO schools should teach tax filing like they (used to anyway) do driving training. Everybody needs it.
Yes, even some grown adults with a simple tax return go to H & R Block to get their taxes done. Many need the rapid refund option and pay extra big time!
MY BF said that someone at work was complaining about taxes, said that they got a raise, and their paycheck was less because of the higher taxes. And my BF actually believes that. I asked him if he actually saw the pay stub...of course he had not. I tried to explain to him that IF there was a lower net pay, it was not because of the higher tax bracket, but I don't think he believed me.
Worth pointing out... HR does not always get it right. Even using state of the art software, there are at least a couple of different withholding methodologies and I've been involved with companies who changed which method they were using or where I had to contact HR about my withholdings being incorrect.
But I know enough about taxes to know when my withholdings aren't what they should be.
Some folks might not.
You know what annoys the hell out of me? All of the advertising from these tax prep services that says they will get you your highest possible refund or try to tease you with comments about a refund as though it's a given that you will even get one. As though it's spooky mysterious sorcery so you need to hire a wizard who knows all the spells and tricks so you can get your pot of gold...when really it's just a freaking math equation with only one correct answer.
So my sister's husband just died and she has to figure out financial stuff for the first time in eons. She was shocked to learn how tax brackets work.
Do YOU know how tax brackets work? I think it's disturbing how many people have no clue how it works. I made my daughter fill out her first tax return by hand so she understands how it all works.
I suppose on the personal finance forum, the percentage who know how they work would be higher.
I worked with engineers. It was disconcerting how many of them thought their entire income would be assessed at the same higher level due to brackets, rather than only that portion of income for each higher tier.
Not a lot of engineers misunderstood this, but you would think any college graduates with analytical skills would simply read their IRS tax formula and realize that making another dollar that is in the next higher tax bracket, doesn't cause your entire income to be taxed at the higher bracket.
I know about marginal taxes and there's an easy chart that comes with 1040 es. It used to be tax brackets were such that one can get a raise and wind up with less pay, but that's been changed thank goodness.
There are some tax surcharges on the upper end I'm not sure I understand fully. I figured the bump from 15 to 20% capital gains occurs around 475 for a single and 525 for a couple. That shouldn't affect me.
But there's a surcharge of 3.8% above 250k and I'm not sure how that's figured. Years that I have a high income I donate a lot to charity but I think the surcharge is based on the AGI. My accountant said you can't deduct donating more than half one's income, no danger of that. But we didn't talk about AMT so I hope I'm not in for a rude awakening.
Just wage income is pretty simple but you add in capital gains and qualified dividends and it's not so simple.
The bolded never happened. There has never been a situation where making $100 more cost you more than $100 in additional taxes unless it put you into an AMT situation.
I think that is one of the most common misconceptions about tax brackets. Yes, many people think that they are "in" the 24 percent or 28 percent or whatever high tax bracket, as if all of their income were taxed at that rate. More important is "effective tax rate", which is the total amount of tax liability divided by total taxable income.
I didn't know until well into adulthood that it wasn't that way. Only when I started making a little more money did I come to understand this. How would someone come across that information if it wasn't specifically pointed out to them?
Not by doing their own taxes. I always did my own looong before there was such a thing as tax software, but I also only ever filed the 1040A until I was in my fifties and owned a home of my own. I never sat and thought, Golly gee, which tax bracket am I in? I just filled out the form, used the tax table, and called it a day.
I didn't know until well into adulthood that it wasn't that way. Only when I started making a little more money did I come to understand this. How would someone come across that information if it wasn't specifically pointed out to them?
Not by doing their own taxes. I always did my own looong before there was such a thing as tax software, but I also only ever filed the 1040A until I was in my fifties and owned a home of my own. I never sat and thought, Golly gee, which tax bracket am I in? I just filled out the form, used the tax table, and called it a day.
THe IRS 1040 Instruction booklet always includes a Table that lays out the brackets in detail.
The bolded never happened. There has never been a situation where making $100 more cost you more than $100 in additional taxes unless it put you into an AMT situation.
I could see it in some phase out scenarios so saying it never happened without AMT is probably inaccurate when considering all historical scenarios
In my working years, whenever taxes were discussed, I was constantly amazed at the number of "adults" who had no understanding of tax brackets, or withholding taxes on bonus or overtime income.
Also pained me to see the 20-something wage earning renters paying the H&R Blocks to do their taxes every year. Once maybe OK, after that its "copy and paste". They just would not listen.
IMHO schools should teach tax filing like they (used to anyway) do driving training. Everybody needs it.
lots of things a person can do themself, but in my view there are some things that it is WELL WORTH paying subject matter experts to do it instead. Filing taxes is in that category. When i was married my then husband was one of those "he can do it himself" boasting types. I said let's see what a professional can do just once, so we did. They saved us on that one tax return alone over $14,000, which more than paid for having the tax returns done professionally for many many years. They also went back and re-did a few previous returns (which boasting soon to be ex-husband had "done himself") and saved us another $9,000.
The exception would be a bare bones very basic return, which i have now as a single person with no property or income from investments. I still go through the HR Block online free e-file though. It doesn't cost me a penny. However for many people "doing it themself" is not a smart choice.
Pretty sure I read about the old style tax brackets in the 60s. Didn't affect me personally but I was enough of an algebra whiz I understood the concept. There would be jokes about it on TV.
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And my BF actually believes that. I asked him if he actually saw the pay stub...of course he had not. I tried to explain to him that IF there was a lower net pay, it was not because of the higher tax bracket, but I don't think he believed me. 
