Need help to lower taxes

kidooo

Level 2 Member
Hi everyone, hoping someone can help me figure this out.

I live in NYC and work NJ getting paid on a W2. So far for 2015 I got paid and withheld the following:

Gross Income: $173,804.18
Social Sec. $7,347.00
Medicare $520.12
Federal Married - 1 $23,185.00
NY State Married - 1 $4,435.69
NJ State Married - 1 $5,078.05
NY Local Married - 1 $5,774.99
NJ Disability $244.80
Total Taxes $48,585.65

I have another $10K-$15K which I didn't get paid yet for last month, how do I know if it makes sense for me to push it off to next year or not? In addition, besides contributing the max to an IRA ($11K total) what other ways to lower my taxes should I be looking at? No 401K at work

I should mention that I have some very minor self-employed income (around 2K for the year) which will mostly really be a negative amount after expenses.

I am really not savvy with all the different Tax situations, and my accountant is decent but wasn't much of help on this questions.

Any advice appreciated
 
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Mountain Trader

Level 2 Member
My advice is to get professional help from a reasonably priced tax accountant who is favorably recommended by at least two people whose judgement you trust. You have enough income and complexity so that relying on help from internet boards (especially one devoted to other topics) is likely to cost you money.
 

Matt

Administrator
Staff member
My advice is to get professional help from a reasonably priced tax accountant who is favorably recommended by at least two people whose judgement you trust. You have enough income and complexity so that relying on help from internet boards (especially one devoted to other topics) is likely to cost you money.
I agree about the professional help, but disagree that we are devoted to other topics :)
 

DanT

Level 2 Member
If your accountant prepared your 2014 taxes then he should be able to answer your question on the extra income by creating a proforma for 2015 using a combination of your 2014 and 2015 information.
 

Matt

Administrator
Staff member
Hi everyone, hoping someone can help me figure this out.

I live in NYC and work NJ getting paid on a W2. So far for 2015 I got paid and withheld the following:

Gross Income: $173,804.18
Social Sec. $7,347.00
Medicare $520.12
Federal Married - 1 $23,185.00
NY State Married - 1 $4,435.69
NJ State Married - 1 $5,078.05
NY Local Married - 1 $5,774.99
NJ Disability $244.80
Total Taxes $48,585.65

I have another $10K-$15K which I didn't get paid yet for last month, how do I know if it makes sense for me to push it off to next year or not? In addition, besides contributing the max to an IRA ($11K total) what other ways to lower my taxes should I be looking at? No 401K at work

I should mention that I have some very minor self-employed income (around 2K for the year) which will mostly really be a negative amount after expenses.

I am really not savvy with all the different Tax situations, and my accountant is decent but wasn't much of help on this questions.

Any advice appreciated
Per above, you should be able to get some professional help ranging from $500-2000 for a CPA or Financial Planner to address this (and other matters). In terms of the question on pushing off income, there are some matters to be mindful of there, such as the constructive receipt doctrine. There's potential for issues to arise such as when FICA, FUTA might be due from the wage.

Here's some more info on Non Qualified Deferred Compensation (NQDC) Plans https://www.irs.gov/Businesses/Corporations/Nonqualified-Deferred-Compensation-Audit-Techniques-Guide

As you can see, it isn't just as simple as 'pushing it' as it would require some formalities on the part of your employer. I would worry that if they haven't even set up a 401k, then NQDC might not be approved by them (just a guess though).

It's hard to see what other opportunities you might have from this. If you can itemize, and aren't subject to the AMT then one strategy might be to prepay state taxes for next year, this would allow you to deduct them this year, and if your income drops next, you'd have an advantage.

A HDHP with HSA is always good from a tax perspective, but too late for this year if you don't have one already.

Beyond that... hard to say without knowing more.
 

thepaul500

Level 2 Member
My very unprofessional, and unhelpful opinion, in to move the heck out of NYC. My total state taxes around about 5k on similar numbers with no local tax...of course then you have to live in the midwest.
 

Vic Diaz

Level 2 Member
And one of the highest property tax rates in the US :)
But at least a house can be afforded compared to other cities, especially New York. 3,500 sq ft home in a great neighborhood with a great school district (planning for when the kids come) for 170,000, valuation is now around 260,000 according to Zillow. Thats a hard deal to beat. Although, a short living stint in NYC definitely does attract me.
 

kidooo

Level 2 Member
If your accountant prepared your 2014 taxes then he should be able to answer your question on the extra income by creating a proforma for 2015 using a combination of your 2014 and 2015 information.
That's a good idea, will try, Thanks.


Per above, you should be able to get some professional help ranging from $500-2000 for a CPA or Financial Planner to address this (and other matters). In terms of the question on pushing off income, there are some matters to be mindful of there, such as the constructive receipt doctrine. There's potential for issues to arise such as when FICA, FUTA might be due from the wage.

Here's some more info on Non Qualified Deferred Compensation (NQDC) Plans https://www.irs.gov/Businesses/Corporations/Nonqualified-Deferred-Compensation-Audit-Techniques-Guide

As you can see, it isn't just as simple as 'pushing it' as it would require some formalities on the part of your employer. I would worry that if they haven't even set up a 401k, then NQDC might not be approved by them (just a guess though).
I need to submit paperwork to get paid so if I delay that my pay get's delayed so I don't think that's relavent


A HDHP with HSA is always good from a tax perspective, but too late for this year if you don't have one already.
We actually just switched to a plan with very high deductible, but doesn't the HSA vae to come from my employer? or can i set it up on my own?

My very unprofessional, and unhelpful opinion, in to move the heck out of NYC. My total state taxes around about 5k on similar numbers with no local tax...of course then you have to live in the midwest.
That's a valid argument only if you can make the same income in both places. Making more money is better 9 out of 10 times even while paying more taxes
 
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kidooo

Level 2 Member
That's a good idea, will try, Thanks.


We actually just switched to a plan with very high deductible, but doesn't the HSA have to come from my employer? or can i set it up on my own?
Does anyone have more info about this?
 

Matt

Administrator
Staff member
Does anyone have more info about this?
Check if your plan qualifies. If it does, you can get a HSA. Doesn't 'need' to come from employer but odd not to.

First easy check is to see if it meets the IRS minimums for deductible.
 

kidooo

Level 2 Member
Check if your plan qualifies. If it does, you can get a HSA. Doesn't 'need' to come from employer but odd not to.

First easy check is to see if it meets the IRS minimums for deductible.
It does, (Over $6K deductible).

Is there any benefit to get it from employer? and are there any specific institutions that you would recommend to open it with, in terms of investment flexibility, fees, etc.
 

Matt

Administrator
Staff member
It does, (Over $6K deductible).

Is there any benefit to get it from employer? and are there any specific institutions that you would recommend to open it with, in terms of investment flexibility, fees, etc.
If you are sure that it is HSA eligible then you could go with a number of providers, such as:

  • Vanguard
  • Fidelity
  • HSA Bank
I will say that my spidey senses are tingling about this one, it would be 'odd' for an employer to offer a HDHP and not offer or mention an HSA to go along with it. I would look closely and also ping HR to get their thoughts. It is absolutely possible to have your own HSA account like this, but most employers would see the HSA as a selling point, and alert their employees to it, which is why I would look to why that didn't happen.
 

nickel285

Level 2 Member
I know this is too late for 2015 taxes but maybe this will help someone for next year. I prepaid my January mortgage so I could deduct mortgage interest from one extra payment. If you're in a situation where you think you'll have lower income the following year and you itemized deductions, it might make sense to do this.
 

Matt

Administrator
Staff member
I know this is too late for 2015 taxes but maybe this will help someone for next year. I prepaid my January mortgage so I could deduct mortgage interest from one extra payment. If you're in a situation where you think you'll have lower income the following year and you itemized deductions, it might make sense to do this.
I've seen this method for state taxes, but not a mortgage. I was under the impression that mortgage prepayments applied to principal rather than interest?
 

Barefootwoman

Level 2 Member
Just adding a data point here - I have experienced terrible customer service and a staggering amount of incompetence connected with my HSA account at HSA Bank. I'd switch if I could, but I can't because it's part of my employer's arrangement. If I were you, I would choose a different provider. I'll never get the hours back that I spent dealing with HSA Bank and their problems.
 

Barefootwoman

Level 2 Member
I've seen this method for state taxes, but not a mortgage. I was under the impression that mortgage prepayments applied to principal rather than interest?

I recall doing this with a previous mortgage some years ago. Our lender gave the option of applying the payment toward principal or as a 12th or 13th regular payment (depending on what you had done the previous year), so we'd send the payment just a few days before the January 1 due date and it would be applied for that current year to help boost our deductions. I could swear it was our CPA who suggested that, but my memory may be hazy. As I recall, it was two payments in December, then one in February in the years where our bonuses were large.
 

Matt

Administrator
Staff member
I've seen this method for state taxes, but not a mortgage. I was under the impression that mortgage prepayments applied to principal rather than interest?

I recall doing this with a previous mortgage some years ago. Our lender gave the option of applying the payment toward principal or as a 12th or 13th regular payment (depending on what you had done the previous year), so we'd send the payment just a few days before the January 1 due date and it would be applied for that current year to help boost our deductions. I could swear it was our CPA who suggested that, but my memory may be hazy. As I recall, it was two payments in December, then one in February in the years where our bonuses were large.
I guess it's possible if the provider allows it. Problem I have with it as a strategy is that everyone will be at different stages of the amortization schedule, so it would require a personal computation, and even when you jump through those hoops - is it actually better than lowering your principal and saving interest going forward?
 

Barefootwoman

Level 2 Member
I think it was a short term solution. We were in the early years of the mortgage, so of course much more interest vs. principal. Another situation of everyone's MMV.
 

nickel285

Level 2 Member
I guess it's possible if the provider allows it. Problem I have with it as a strategy is that everyone will be at different stages of the amortization schedule, so it would require a personal computation, and even when you jump through those hoops - is it actually better than lowering your principal and saving interest going forward?
Yeah it would depend on the lender. What I did was to pay my January mortgage on December 28 instead of January 1. My lender by default treated this a normal payment (not an extra payment entirely on principal). My goal wasn't to make any extra payments toward principal, but rather to shift one payment's interest paid into the 2015 tax year.

Barefootwomen is spot on about being a short term solution and MMV. We are early in our mortgage so more than half of our payments are going toward interest. Also our household income was unusually higher than normal in 2015, so by making January's mortgage payment in December we can to deduct that mortgage interest in my 2015 taxes. Next year we will only be making 11 mortgage payments so it is likely we'll be taking the standard deduction instead of itemizing.
 
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