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I enter in my w4 and take the standard deduction. Takes me 5 minutes.
Haven't owed since I had a retail job that reset my withholding when I got promoted to make it look like I got a bigger raise.
Do you not earn interest on any accounts? No loans on which you pay interest? Are you a student?
Like I said: standard deduction. Those numbers never come close to make itemized deductions worth the time and effort.
Interest is income, so your W-2 won't be enough to account for that. You'll also need to go to any banks, taxable brokerage accounts, etc, because that money will impact your taxable income. Still not a ton of work, but it's still more than just W-2 + standard deduction.
Most people aren't going to have anywhere near enough taxable investment income for that to matter.
I think I got about $.87 in interest payments from bank accounts in the past year. I don't think that's going to make a huge difference in taxable income.
You need a better bank account then.
Let's say you have $10k in cash (typical emergency fund) and get 4% on it (relatively competitiv; e.g. Ally gives 4.25%), that's $400 in interest (not including compounding), which is a reportable amount of income. If you're doing something clever or have a bit more cash for some reason (e.g. saving for a house), you could easily get into more interesting amounts of money.
$10k in cash (typical emergency fund)
There's your mistake right there, thinking people have even $10k to serve as a spare emergency fund.
I don't even have a thousand spare right now for an emergency.
It's just an example. You can get semi-interesting numbers with just regular cash flow, depending on what kind of interest your accounts get. Let's say you make $60k/year and your money sits in your account on average for 5 days. So that's essentially the same as $800-900 (
($60k / 26) * (5/14)) earning whatever your interest rate is on your account. That's something like $20-40 for 2-5%. That money counts.Your risk of an audit increases the more discrepancy the automated checks find. This article claims poorer people are getting targeted more and more, so I think it makes sense to take a few extra minutes to report all of the little accounts you may have.
I had like $6k savings until I did my taxes and apparently everything I saved up was how much I owed the tax man. I thought I had actually gotten ahead but turns out that was an illusion lol
Yea I appreciate the dude trying to make sure people don't forget stuff and get fucked by the irs but he's a bit privileged thinking we're all as well off as he is.
I'm not suggesting that at all, I'm merely suggesting that you review your interest in your bank account since it could be a number the IRS could be interested in. It all depends on how much savings you have, what interest rate you get, etc, but even some checking accounts can have enough interest to be interesting.
With the higher funding for the IRS, we're seeing more audits, and poorer people will likely get audited more. So I'm just trying to protect people from getting audited.
Thanks for the casual assumption brokerage accounts enter into the picture.
No savings for interest, all income goes to debts and expenses.
But I am doing relatively great almost entirely because my housing costs are comparatively low and locked in for 27 more years.
That's fair. My point though is that with higher IRS funding, poorer people are probably going to get audited more, and if you're only using your W-2, you're probably missing something and could get caught with an audit.
Other things that could factor in:
- bank account bonuses - i.e. that $100 to sign up for an account or whatever (usually doesn't include credit card rewards, but that can also depend)
- gambling wins
- interest on inheritance money, if any