Taxes

A couple years ago I constructed a graph of what percentage of my total tax expenditure went where, and I decided to do the same thing for 2009. My tax situation is a bit different now, as since my last chart I’ve had kids and I purchased a significant amount of land from my parents. This shows out of all the taxes that I keep track of, which agency gets how much of my total taxes. This includes taxes on income in 2009 (modified by refunds received in 2010 for the 2009 tax year), taxes on assets, and sales taxes that I kept track of. This does not include other taxes on expenditures like gas tax, cable tax, meals tax, or sales tax where I didn’t enter the sales tax amount as an itemized split into my finance program (since I’m not worried about tracking it that closely). I would have preferred a pie chart, as it’s more customary for this kind of thing, but it’s hard to show a negative percentage in there very well. Total appears to not be 100.00% due to rounding.

The Town of Charlton fiscal year (like for all MA towns) is from July 1 through June 30. So, FY09 was from July 1, 2008 through June 30, 2009, and recently ended.

Property taxes for FY09 are based on the assessed value of property as of January 1, 2008, and were due on August 1, 2008, November 3, 2008, February 2, 2009, and May 1, 2009. The two payments in 2008 are “estimated” based on a guess as to what the taxes would be, and then the estimates are made up for on the two 2009 dates once that actual tax rate data is known, such that the total tax for the year ends up being correct. For FY09, the total was $9.05 per $1,000 assessed value of property.

As I’ve mentioned before, instead of the Social Security tax that private-sector workers pay, government workers (at least those working for the Commonwealth of Massachusetts and its subdivisions) have an alternative 7.5% mandatory contribution to the “SMART Plan”. This is an actual account, kind of like a 401(k), where one actually has an account balance that slowly grows and one gets at retirement. (Those working full-time for the state have a more complex system, but I’m describing how it works for part-time workers, where it’s just a straight deduction and there are no choices on how it’s invested.)

While I (and many others) got my taxes filed long ago, when most Americans think of April 15, the first thing that comes to mind is that it’s the day that income tax returns are due.

So, in honor of today, here’s a link to IRS Form 1040 for the tax year 1913. I, at least, found it somewhat interesting. (It’s likely some sort of reproduction seeing as the PDF hadn’t been invented at that time, and it doesn’t look like a scan, but it’s posted on the IRS web site, so I assume that it’s representative of the real thing.)

• Apparently, the newspaper got it wrong that Mr. Singer would attempt to appoint a successor for Town Moderator if he were elected to the Board of Selectmen. It’s still not clear to me who would. The Board of Selectmen would be a possibility, although I would think that it could be Town Meeting. However, it’s possible that the Town Meeting has delegated that authority to the Board of Selectmen via their annual vote to let them fill appointments. But Mr. Singer would need to get elected, first, anyway.
• Making the Selectmen’s race more interesting is that there’s a Bay Path senior who plans on running.
• I’ve basically gotten the custodian of Jessi’s former 457 plan to admit that they gave us an incorrect 1099-R, but that they won’t send a corrected one. I may call the IRS and try to get them involved in correcting the situation.
• I made enough money judging last year that I’m claiming it on my taxes. I hope they accept my assertion that it’s “hobby income” and not “self-employment income” and thus not subject to self-employment tax. Especially as I consider it a hobby and not employment.
• I’ll be judging this weekend at the Conflux prerelease, on Saturday at TJ Collectibles and on Sunday at Rising Phoenix Games.

Most people who have a job pay the “FICA” or Social Security tax. This tax is 6.2% of income paid by the employee as withholding from each paycheck, and another 6.2% of income paid by the employer. But of course, this system that’s supposedly good enough for the rest of us doesn’t apply to government employees. No, they have their own program. For part-time government employees in Massachusetts, there’s a 7.5% compulsory contribution to the Massachusetts SMART Plan instead of a payment into Social Security. It’s a 457 plan, which is somewhat like a 401(k) or 403(b). Although, unlike those, there was no choice as to how to invest the money. The fund that it gets invested in is called “The Income Fund”, which is a fund that isn’t supposed to lose value, but that I can’t easily find many details on.

Interesting developments in filing taxes this year. On the federal level, the IRS’s Free File program now has a basic just-fill-in-the-forms web filing option, without the restrictions that the “regular” Free File program has. It looks like the IRS strong-armed the tax software industry into making it for them.

In past years, I’ve used TaxACT for federal filing because they offer it completely free as long as you keep on clicking “No, I don’t want the useless deluxe version” every other screen. I may still use it, but I’m very happy that there’s an option that just emulates the paper method, but does it electronically.

“4. Shall the Town of Charlton be allowed to exempt from the provisions of proposition two and one-half, so-called, the amounts required to pay for the bond issued in order to design, construct, and equip a new highway operations facility?”

As a little background for those unfamiliar with Prop. 2½, it was a measure passed by ballot initiative in 1980. Each municipality in Massachusetts has a “levy limit”, which is the maximum that they can levy in property taxes each year. This limit gets increased each year by 2½% plus an adjustment for any new growth in the town. However, a town can pass a ballot question to increase their levy limit permanently (a “Prop 2½ Override”) or temporarily to pay for something (a “Prop 2½ Debt Exclusion” or “Prop 2½ Capital Outlay Exclusion”). (Although often colloquially the temporary form will be called an “override” as well.)

I think I’ll do a blog series on my thoughts on the five ballot questions that I’ll be voting on this coming Tuesday. (If you want to see if your town has added questions to the three statewide ones, plug your address into the Secretary of the Commonwealth of Massachusetts’s Election Division Voting Info site.)

Question #1 is about repealing the state income tax. I’m wholeheartedly for voting for this question. I think the main goal of getting it to pass is to force the Legislature to take a hard look at its programs, and cut those that it really doesn’t need. I think that the 40% reduction in their budget is possible, but I’m expecting that they won’t actually reduce things that much. I mean, there was a ballot initiative that passed in 2000 to lower the income tax from 5.85% to 5.0%, and the Legislature basically ignored it, although they did eventually slowly lower it to the current 5.3%. (Although, you can still voluntarily pay 5.85% if you want. I always get a chuckle out of that check box on the state tax form.) So, it seems unlikely that they’ll actually just keep all other taxes the same and cut the 40% of the budget. But I bet they’ll cut some things, overall taxes will be somewhat lower than they are now, and it at least sends a message that we’re tired of paying for expensive government programs that don’t work. I hope that this will increase transparency of our state government, as they publicly demonstrate what is and isn’t important to them.

This past weekend, I calculated and informed the state and federal government how much I was supposed to pay them in taxes in 2007, and scheduled the transfers to and from my bank account to settle up. I also constructed this graph, showing what portion of my total tax expenditure went for what. (Note that this only includes taxes based on assets and income, not taxes on expenditures, because I don’t track those as closely.)