March 22, 2013
Dear Everyone:
I decided to do my
taxes this week.
You might think, being “unemployed” would mean not having to do a
tax
return. But the truth is, I
wasn’t “unemployed” last year.
I actually had two “employers”.
The first “employer” was the Company that stopped employing me in the
middle of 2011. Apparently,
2011 was a good year for the Company, so they paid out a “bonus” to all
employees, including people who were still employed in April, 2011 paid
in April, 2012. Even though
I was no longer employed, the
IRS still considers the bonus “income”.
So the Company obligingly “withheld” roughly 25% of it for
Uncle
Sam. The only way to get any
of it back was to do a tax return.
The second “employer” was some company I’ve never heard of.
Apparently it’s the “owner” of the company that I was working
for, the “contract vendor” that hired me (on orders from the Company
that stopped employing me in the middle of 2011), then “farmed” me back
to said Company for some temporary work.
This company also obligingly withheld roughly 22% of my base pay
for Uncle Sam. And the only
way to get any of it back was to do a tax return.
Other sources of income include “unemployment insurance” and the
refund
on my State Income Taxes from 2011.
You see, when you get paid in 2011, some money is withheld for
the State. When you do your
tax return in 2012, the State is required to “refund” the extra money
that it took in 2011. But,
because the State refunds the money the following year, the IRS
considers it “new” money and taxes it again.
They tax it the first time, when you get paid, then they tax it
again when you get it returned.
This is known in tax circles as “double-dipping”.
As for “unemployment insurance”, it’s not really “insurance” per se.
Your employer is “required” by the State to put money into a
fund. When your employer
“un-employs” you due to “lack of work” (code for:
We sent your job overseas for the
tax write-off), you qualify to
get some of that money to tide you over until you find another job.
I did qualify and got a nifty
debit card worth $450 per week that
I used to pay for groceries and prescriptions.
Until the State found out (legally I had to tell them) about that bonus
that I got from the Company.
Then they cut me off.
Nevertheless, the IRS considers this “income” and taxes it accordingly.
In other words, Robbing Peter to Pay Paul, with the poor
“unemployed” person (me) in the middle.
All of which added up to enough money (roughly one-third what I made in
the “real world”) to warrant doing my tax return.
My tax software computed that I should get about $500 back, but
that was before we included the deductions, notably interest paid on my
home loan;
charitable donations; and medical expenses.
The first two stayed about the same as in previous years.
The medical expenses usually don’t count for much, because my “normal”
income was always so much more percentage-wise.
But last year was different.
Health insurance premiums, although offset by the Company (after
38 years, I qualified for continuing support), still add up these days,
as everyone knows; even more now that I’m “retired”.
The same applies to
prescription costs and “co-payments”, money paid to
doctors, dentists and so on.
One advantage to using a national chain pharmacy (not that I had any
choice since my health insurance company made a “sweetheart deal” with
the chain) is that they have online services, including a history of all
my prescriptions from last year, with the cost of each.
So it didn’t take too much time to add up all the medical
expenses.
Bottom line: I’ll be getting
a nice, little refund on my “income” taxes again this year.
In other words: Lunch is on
me.
Love, as always,
Pete
| Previous | Next |