Gay Marriage Rights, Financial Benefits, And Tax Penalties

White House In Rainbow Colors Celebrating Gay MarriageHere are Justice Anthony Kennedy’s words after the Supreme Court voted on June 26, 2015 that same sex couples have a constitutional right to wed. Justice Kennedy was the swing vote.

No union is more profound than marriage, for it embodies the highest ideals of love, fidelity, devotion, sacrifice, and family. In forming a marital union, two people become something greater than once they were. As some of the petitioners in these cases demonstrate, marriage embodies a love that may endure even past death. It would misunderstand these men and women to say they disrespect the idea of marriage. Their plea is that they do respect it, respect it so deeply that they seek to find its fulfillment for themselves. Their hope is not to be condemned to live in loneliness, excluded from one of civilization’s oldest institutions. They ask for equal dignity in the eyes of the law. The Constitution grants them that right.

Tax Penalties For High Income Earners: Net Investment Income, AMT, Medicare

Tax Penalties For High Income EarnersTax refunds are nice. Unfortunately, I won’t be getting one given I didn’t pay quarterly estimated taxes in 2014 despite my freelance income. So why didn’t I pay quarterly estimated taxes given there’s a likelihood I’d pay a penalty if I did not?

Uncertainty and certainty.

I was uncertain whether I’d freelance for the entire year. After spending most of 2012 and 2013 working on my own business, adding 25 hours a week of freelance work was a new endeavor. But I enjoyed freelancing so much (and didn’t get fired) that I decided to commit to at least a whole year. Furthermore, my consulting client was kind enough to offer stock options, so I had an added incentive to stay for at least the one year cliff.

What I was certain about was earning a higher W2 income since my online business kept growing. When it comes to estimated taxes, my accountant suggests following the safe harbor rules and paying 10% more than the previous year’s tax liability. By doing so, even if you earn a much higher percentage in the current year, you’re safe from having to pay penalties and fees of any underpayment. If you’re unsure about your business outlook, to be safe, it’s advised to pay at least 90% of your prior year’s tax liability.

The Largest Tax Refund Request Ever! Plus Tax Tips For Small Business Owners

Tax ScamIn what could be the most amazing tax move ever, a Georgia woman filed a $94 MILLION tax refund! You have to make over $1.6 billion dollars in income to pay $94 million taxes with Georgia’s 6% state income tax rate. Sure, it’s possible to make $1.6+ billion dollars, but probably not by this woman.

So how on Earth did she get caught pray tell? Investigators asked the woman to come to the supermarket to pick up her $94 million refund check. That’s when she was arrested.

Supposedly the woman kept calling in to the Georgia tax department asking when her tax refund would be ready. I guess if I was really expecting to get a check that big, I might not be able to help myself either! But a smarter person might have hired an impersonator instead for $500,000 to pick up the check for her and bounce. I mean, what’s paying 0.5% of your tax refund to drastically improve your chances of not getting caught anyway?

Stupidity can’t be the reason why this tax fraud happened. Greed must be the main reason wouldn’t you agree? Have a look at the video clip below.

What’s Your Largest Ongoing Living Expense? Taxes Of Course!

Setting SunThe following is a guest post by FS reader, Jamin Eberhart. He received his MBA, worked in biotech and now consults for biotech companies. He is extremely focused on building his freedom fund, and struggles just like me to find the right balance between living it up and being fiscally responsible. 

The news media is always talking about how the top three costs for households are:

  1. Housing (rent or mortgage)
  2. Car (loan payments and interest)
  3. Education or Child Care (student loans or child schooling)

Is A Backdoor Roth IRA A Good Move For Higher Income Earners?

Backdoor Roth IRAThere are three primary types of retirement plans in the U.S. today: Traditional IRAs, 401(k)s, and Roth IRAs. Although there are some other plan options out there such as SIMPLE IRAs, SEP IRAs, for the most part when people are talking about their retirement funds, they are referring to one of the three main types mentioned above.

It is often debated which of the two IRA options is better: the Traditional IRA that is tax deferred, or the Roth IRA that is funded after tax. Hypothetically speaking, if your earnings and tax rates went unchanged for your entire life, both types of IRA plans would net you the same amount of money in the end – it’d just be a matter of either paying the taxes up front or deferring them until later. However, it’s unlikely you’d actually be in a situation where those two variables would stay constant for your entire lifetime, since earnings and income tax rates regularly fluctuate.

I’ve been a staunch opponent of the Roth IRA because it’s never a good idea to pay taxes up front to a government who excels at wasting money. So long as you have your money, you can figure out ways to shelter your money from the government in a myriad of legal ways.

But what if you are a super pessimist who believes taxes have to go up because the budget is so poorly managed? Furthermore, you’re inept at navigating the many legal tax savings rules. In such a scenario, even those of us in the lowly 25% and under federal income tax brackets are probably not safe.

Increase Your Savings By Identifying Specific Reasons To Save

save money for freedom. Jamaica panorama

Save money so you can live a free life! Jamaican sunset

I was invited to join the TaxACT How I Save blog tour which shares ways to keep more money in your pocket. Last year, TaxACT saved America over $240 million on tax preparation. 

One of my main goals for 2015 is to save $100,000 in new liquid cash after spending too much money on remodeling in 2014. I got down to around $25,000 in liquid savings towards the end of the year and it just didn’t feel enough for me. Each person’s desire for liquidity is different given our living expenses and risk tolerance levels are all different.

The reasons why I want to have roughly $100,000 liquid at all times is as follows:

1) Minimum private equity investments generally are around $50,000, at least all the ones that have been presented to me. The last thing I want to do is only have $25,000 and not be able to invest in the next Uber.

2) It’s always good to have cash on hand when the stock market throws up. The general long-term trend is up and to the right. I want to implement my own advice on how to better dollar cost average with $5,000 – $10,000 investment increments at a time.

3) I have a goal to pay down my first rental property mortgage within 12 months. There is roughly $85,000 left in principal from this 11.5 year old mortgage (started at $464,000), which is starting to annoy me. I will be averaging roughly $7,000 a month towards paying down extra principal along with my usual monthly mortgage payment that pays down $1,100 in principal in order to achieve my pay down goal. Having $100,000 allows me the flexibility to pay it all off in one go, or give me the confidence to keep on my $7,000 a month plan.

How To Save More Than $100,000 A Year Pre-Tax: Open A SEP-IRA Or Solo 401k

SEP-IRA by American Advisors GroupOne big goal on Financial Samurai is to highlight to readers what is financially possible. Once you know what is possible, you minimize your limiting beliefs and tend to strive much farther. Through close to eight hours of research and production, this post will explain how you can add more than $100,000 every year pre-tax to your retirement account if you have the right employer and proper strategic money making mindset.

The 401k maximum contribution for 2015 is $18,000. The increases will likely continue by $500 increments every year or two to keep up with inflation. Contributing $18,000 pre-tax a year for 30+ years will most likely make you a millionaire by the time you retire. Unfortunately, $3 million is the new $1 million, and in 30 years, $7 million will likely be the new $1 million if we assume a 3% annual inflation rate!

The 401k is not enough for most people to retire on. Sure, we potentially have Social Security to help us when we reach, at the earliest, 62 years of age. But I wouldn’t count on the government to properly manage our money until then. Beyond maxing out a 401k every year, I encourage everyone to also invest at least 20% of their after-tax, after-401k money into a diversified investment portfolio.

As a contractor over the past year, I’ve discovered something that will really supercharge one’s pre-tax retirement savings. The discovery still seems too good to be true, so for any of you tax gurus out there, please speak up and correct me if I’m wrong. We are going to crowd source this post into one of the best maximum pre-tax retirement posts around. The research I’ve done is based off the IRS website, my own experience, and speaking to Fidelity’s small business retirement department where I have a rollover IRA, SEP-IRA, and Solo 401k.