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One thing nobody has mentioned yet is that you need to be careful about wash sales when dealing with capital losses. If you sell an investment at a loss and then buy the same or a "substantially identical" investment within 30 days before or after the sale, it's considered a wash sale and you can't claim the loss on your taxes right away. I learned this the hard way when I thought I had $8k in losses to carry over, but because I had rebought some of the same stocks within the 30-day window, about $3k of my losses were disallowed as wash sales. The loss doesn't disappear forever, but it gets added to the cost basis of the replacement shares, so you don't get the tax benefit until you eventually sell those shares.
How exactly do you track this stuff? Like if I sold some Tesla at a loss in December but then bought some again in January, do I have to manually figure out the wash sale or will my brokerage statement show it? This whole capital loss thing is making my head spin.
Most brokerages will track wash sales for you on your 1099-B forms and year-end tax statements. They'll have a column that shows "Wash Sale Loss Disallowed" or something similar. However, they only track wash sales within the same brokerage account - they won't know if you sold in one account and bought in another, or if your spouse bought the same security in their account. If you're doing your taxes with software like TurboTax or H&R Block, they'll usually flag potential wash sales when you enter your trading information. But it's always good to review your brokerage statements carefully and look for those wash sale notations, especially if you're an active trader or if you're trading the same securities across multiple accounts.
Also, make sure you understand the difference between short-term and long-term capital gains/losses. If you held the investment for less than a year before selling at a loss, it's short-term. More than a year, it's long-term. When you apply carried-over losses, short-term losses first offset short-term gains (taxed at your ordinary income rate), and long-term losses offset long-term gains (taxed at the preferential capital gains rates). Only after you've offset gains of the same type can you apply remaining losses to the other type. This order of operations can make a big difference in your tax bill if you have a mix of short and long-term transactions! Many people miss this nuance.
Great point! I just want to add that this is why tax software can sometimes get this wrong. It gets complicated fast when you have multiple types of gains and losses from different years. My tax guy showed me how one year I had long-term losses but short-term gains the next year, and the software didn't optimize how they offset each other. Had to manually override it which saved me almost $900.
I've been trying to submit my taxes electronically since yesterday but I keep hitting a wall. Every time I submit, I get a rejection email with this weird error: Issue: Business Rule X0000-005 - The XML data has failed schema validation. cvc-complex-type.2.4.a. Invalid content was found starting with element 'WagesNotShownAmt'. One of '{"http://www.irs.gov/efile":WagesLiteralCd}' is expected. It also says: Field/Xpath: /efile:Return[1]/efile:ReturnData[1]/efile:WagesNotShownSchedule[1]/efile:WagesNotShownSch[1]/efile:WagesNotShownAmt[1] This might as well be in another language! I have two different W-2s and I've entered everything correctly as far as I can tell. Why is it saying "not shown"? I saw an old post suggesting it might be related to punctuation in the forms, so I went through and removed everything except spaces and hyphens. Still no luck after checking everything three times. Do I have to give up on e-filing and mail this thing in? My refund is pretty decent this year and I don't want to wait forever to get it. Has anyone run into this specific error before? UPDATE: I figured it out! Posting the solution in case anyone else gets stuck with this same issue. I had put my total wages in both the white box on the left side of Line 1 AND in the column on the right. Apparently you're only supposed to put the final number in the right column. When I cleared out the white box on the left and only kept the number in the right column, the system accepted my return immediately. Such a small thing causing so much frustration!
Just so others know - these XML schema validation errors usually happen with fields that have specific format requirements. The one that got me last year was putting cents in my estimated tax payments using a decimal point (like 1500.00) when the field was only supposed to have whole numbers (1500). Took me forever to figure out!
Wait really? So we're not supposed to use decimal points at all in the tax forms? I've been doing mine wrong for years then...
It depends on the specific field in the tax software. Some fields accept decimals, while others require whole numbers only. The problem is that most tax software doesn't warn you about this until you try to e-file and get rejected. For example, estimated tax payment fields typically want whole dollars only, no cents. But some deduction fields might accept exact amounts with cents. The IRS e-file specifications are incredibly detailed about which fields accept which formats, but regular taxpayers never see these rules. That's why these errors are so frustrating - we're basically being asked to comply with technical specifications we can't see.
Throwing in another tip - sometimes these XML errors can be caused by special characters in name fields. I got rejected because I had "O'Brien" as my employer name, and the apostrophe caused an XML validation error. Had to remove it to get accepted.
OMG thank you!!! I think this might be my issue. My employer's name has an ampersand in it (Something & Sons LLC) and I keep getting rejected. Going to try removing it now!
For what it's worth, I've had two jobs with very different pay scales for years (one $85K, one about $5K). I never check the multiple jobs box and just claim single/zero on both W-4s. This has always resulted in a refund at tax time. The withholding from my main job covers most of my tax liability, and the little bit withheld from my smaller job is just extra cushion. Simple approach but it works for me!
But doesn't the new W-4 not have allowances anymore? I thought they got rid of the "0 allowances" option in 2020 when they redesigned the form.
You're absolutely right, and I should have been more clear. On the new W-4 form, I don't check the multiple jobs box, and I don't claim any adjustments to income or deductions. This effectively results in maximum withholding (similar to what "0 allowances" used to do on the old form). The principle is the same though - I let my main job withhold at the standard rate, and then my smaller job also withholds at the standard rate. Since the withholding tables don't "know" about my other job, I end up with a bit more withheld than necessary, which gives me a refund rather than owing taxes.
I made a huge mistake with my W-4 last year - checked the multiple jobs box for both my main job ($90K) and my weekend job ($7K), and they BOTH withheld as if I was making double the income at each job. Got a massive refund but my paychecks were tiny all year! Don't overthink it - with such a small second job, just make sure you're withholding enough at your main job. The IRS withholding calculator on their website can help you figure out the exact amount if you want to be precise.
Just wanted to share my experience - I filed on Feb 7, got my state refund on Feb 19, and my federal finally came through yesterday (March 9). So about 30 days for federal. Never had it take this long before. Used TurboTax and had direct deposit set up. Nothing complicated on my return either - standard W-2 income, standard deduction. Still took forever compared to previous years.
Did you claim any credits like EIC or child tax credit? I heard those automatically delay processing. I'm on day 25 of waiting and getting nervous...
No special credits at all, which is why I was surprised by the delay. Just a totally vanilla return with W-2 income and the standard deduction. From what I've gathered reading online, even the simplest returns seem to be taking longer this year. The IRS apparently prioritizes certain returns with credits for lower-income filers, which is understandable, but it means even simple returns can sit in the queue longer than usual.
Anyone else notice the "Where's My Refund" tool is basically useless? Just says "Your return is still being processed" for WEEKS with no additional info. How hard would it be for them to add a simple estimated date or at least tell us if there's an actual problem vs just being in a queue??
Theodore Nelson
5 To address your question about suing the government - it's extremely unlikely you'd succeed. The Supreme Court has previously ruled (in Flemming v. Nestor, 1960) that Americans don't have a legal right to Social Security benefits. Congress can change the rules at any time. That said, completely eliminating Social Security is politically unfeasible. About 65 million Americans receive benefits, and they vote in high numbers. Any politician suggesting complete elimination without replacement would face enormous backlash.
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Theodore Nelson
ā¢14 Wait, we don't have a legal right to benefits even though we're forced to pay into the system? That seems completely unfair! How is that constitutional?
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Theodore Nelson
ā¢5 The court essentially ruled that Social Security is a social program, not a contract, and Congress retains the right to alter, amend, or repeal any provision of the Social Security Act. The case specifically involved a person who was denied benefits after being deported for being a member of the Communist party. While it might seem unfair, the constitutional basis is that Congress has broad powers to tax and spend for the general welfare. The FICA tax is considered a valid exercise of this power, and benefits are authorized spending programs that can be modified. This is different from private contracts or property rights that have stronger constitutional protections.
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Theodore Nelson
3 Something important to consider: eliminating Social Security would create a massive surge in poverty among elderly Americans. Before Social Security, about 50% of seniors lived in poverty. Today it's around 9%. For about 40% of elderly Americans, Social Security provides at least 50% of their income. For about 14%, it provides 90% or more of their income. Any complete elimination would need to address this reality or we'd see catastrophic consequences.
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Theodore Nelson
ā¢17 This is why I'm always confused when younger people say they're planning as if Social Security won't exist. Even if it faces funding challenges, some version of it will almost certainly continue. The political consequences of eliminating it would be too severe.
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