The tax trap...

 

 

"I am not crabbing about this because I am in a special class - I am crabbing as all of us, should we live long enough, will experience this..."

I learned something yesterday. It was a hard lesson squeezed in between church and the Super Bowl. I did my taxes. Since most years we have to pay in, I usually end up doing my taxes in the early spring, right before the April 15th deadline. But I thought this year would be different. We still have a few years left to pay on the house and we had a TON of charitable deductions. We escrowed taxes better than previous years, and my belief was we would do okay on federal and break even on state. I was only half right.

When I finished up the Turbo Tax program, I sat at my desk dazed and confused. Yes, we did fine on federal (for a change), but the state was a mess. Why is that? Social Security and my military pension. When you first start to draw Social Security, there is no tax withheld. There is not even an option in the initial filing to have tax withheld. You need to access the system and have a voluntary amount withheld for taxes. There was no W4 (withholding) to fill out.

However, that is only for federal. There is no provision to withhold state. None, nada, zip. Why you might ask? Because the vast majority of states DO NOT TAX social security benefits! This state does. And that puts seniors in a "tax trap". To make matters worse, the only solution the state gives you is to file your tax liability quarterly. That will keep you from having to pay the whopping $36 dollar penalty for not withholding enough taxes. So my question is simply this - HOW IN THE SAM HILL CAN YOU GET FINED FOR NOT WITHHOLDING ENOUGH WITH SOCIAL SECURITY DOES NOT ALLOW FOR IT????

Not to sound immodest, but I really felt our tax planning for this year was almost textbook. I really did. After this loss, I am not going to go through the normal stages of grief. I am going to skip the acceptance part. I am still stuck on anger. I told my wife I am going to be a huge pain in the butt with certain lawmakers who want to keep this status quo. This is wrong, dead wrong, to do to seniors who spent their entire working life paying in taxes into the machine. Tax and spend, tax and spend. Well, guess what? I would like to "spend" also! But no - I have to send $2,500 into the state so they can spend it for me!

A longtime friend and resident of Minnesota (whom many of us know) recently moved to Wisconsin. For some reason, Wisconsin believes in treating seniors right. Wisconsin (like many other states) don't tax Social Security or military pensions. My friend said doing his taxes this year was a joyful experience. After doing Minnesota taxes for many, many years, doing Wisconsin taxes this year was like "getting a raise."

What I will ask of every senior who reads this to do one thing - figure your taxes with your retirement taxed by the state and then figure it untaxed by the state. It will amaze you on how big the difference is. After you do that, get angry, and then active in your resolve. This is crap, pure and simple. Seniors should not get fleeced by the state after being good and loyal tax contributors for decades.