One inevitable thing…

For the second year in a row, the Internal Revenue Service in the U.S. pushed the tax filing deadline ahead due to COVID-19 and other issues. Last year in 2020, filing for 2019 taxes was pushed up to October 15. This year, filing for 2020 was moved to May 17, which was last Monday.

The normal filing date is April 15, or the 16th if that date falls on a Sunday.

Apparently, the way Americans pay income taxes is kind of weird compared to the rest of the world, so let me give a little explanation.

People who get paid regular wages, whether hourly or salary, have amounts withheld each paycheck to cover certain taxes. Some amounts go to federal and state income taxes. The former is national. The latter depends on where a person lives.

There are two deductions basically for health and welfare: an amount that goes into Social Security and which is matched by the employer. This is the federally administered retirement plan that most people qualify to start withdrawing from at 65.

The other is for Medicare, which is the closet thing we have to socialized medicine here, but of course there’s a catch. Again, people generally qualify at 65 — younger if they’re permanently disabled or have end stage renal disease, i.e. terminal kidney failure requiring transplant. However, the only part of Medicare that is completely covered is known as Part A, which only covers hospitalization.

For Part B, there is a monthly premium and while it’s a lot cheaper than what most of us pay, it can still be hefty for someone who has retired and started collecting Social Security. People also have to buy their own Part D coverage, which is for prescription drugs. For some people, with very few or generic-only medications, they can get this coverage fairly cheaply and not pay a lot for their meds.

But… if their doctor’s prescribe higher-tier drugs, or ones that are not as available as generics, drug costs even with a plan can get ridiculously expensive. When I used to work in insurance, we did have cases of people who’d wind up having to pay thousands or tens of thousands per year just for their prescriptions.

If someone is just on Social Security, the drug costs can bankrupt them, although the Part B premium can be deducted from their SS benefits. But the catch is that Social Security is pretty much means based.

That is, if you worked constantly from 18 to 65 and made good money, you’ll have stuffed that plan to the gills and get the maximum monthly payout. And if you did that, you probably already have retirement savings or maybe even are old enough to have had a pension from work at some point. Good for you.

But, and particularly among the generation that’s been on Social Security for a bit already, those who didn’t work all that time or who didn’t make great money or both get much less per month. This applies to a lot of people in minimum-wage service jobs. But it also affects a lot of women of a certain age, who might have left the work force in their early 20s to raise a family, with the husband the sole breadwinner.

I think there’s some formula in that case based on the husband’s earnings to increase the wife’s benefits, although I’m not sure.

But the point is this: These amounts all come out of our paychecks to cover our retirement and eventual senior care, but have nothing to do with health insurance right now. For that, if you’re lucky, your employer subsidizes your plan, but even then it’s not cheap. If they don’t subsidize it, then it’s really not cheap.

Comparison: When I didn’t have employer health insurance last year, I paid about $750 a month for a plan with a high deductible and high maximum out of pocket cost, meaning that I would have been very unlikely to use it anyway — and that was with an income-based reduction from the State of California, which was actually fairly substantial.

This year, I was lucky enough to get a job that covers 75% of my health care premium, so I was able to opt up to the platinum level plan — so no deductible, no out of pocket required, but still over $500 a month. However, since I’ll use it because I can basically walk into the doctor’s office or hospital for free or toss them $10 or $20 for lab work or whatever, it’s worth it.

This premium is also paid by deduction from my check, although that goes direct from my employer to the insurance company with no government involvement. The nice part, though, is that they deduct it before taxes, meaning that my income looks that much lower to the government for tax purposes. (Yes, State and Federal withholding went down once the health insurance deduction kicked in.)

More on all this later, though. Let’s get back to America’s really screwed up income tax system.

The one other deduction that most people have from their paychecks is for their State Disability Fund. This is actually a ridiculously tiny amount — usually a couple of bucks a week at max — but it’s for a good cause. If you become temporarily or permanently disabled and cannot work, it will pay you… something. Although, again, from what I understand, it’s far from a living wage either, just like Social Security.

That last sentence is going to become really ironic later on in this article.

But for all my non-U.S. readers, I hope this hasn’t been too confusing. The summary is that when we get our paychecks, we have money taken out in advance for these specific things, with the taxes submitted to what are basically government escrow accounts in our names.

This only applies, though, if you’re considered staff or an employee. If you’re freelance, you’re fucked. In that case, you get a check for the full amount and you’re responsible for figuring out the taxes you owe (about 20% higher because you have to cover the parts that your employer normally would) and have to submit a payment quarterly.

To put it in bureaucratic terms, when the end of the year rolls around, all those staff workers receive a document called a W-2. The freelancers get a 1099 followed by various letters. All of these forms are supposed to be delivered by the last day of February with the information for the prior calendar year.

Oh, right. A 1099 also applies for things like unemployment, whether taxes were withheld or not, disbursements from retirement accounts, miscellaneous income, etc.

Traditionally, the deadline for filing one’s taxes has been April 15 for the prior calendar year. Why this date? It’s strictly an accounting thing, since it’s two weeks after the end of the first quarter.

Accounting tends to be reconciled in quarters, which are three month periods, and the expectation has always been that accountants can pull it all together for the previous quarter in two weeks. In the big picture, if you’re a freelancer, then you make your estimated tax payments four times a year on this schedule — April 15, July 15, October 15, and January 15.

And what happens on or before April 15? Well, Americans gather together all of those W-2s, 1099s, and, if necessary, receipts, bank statements, and other whatnot, get ahold of the specific tax forms they need, and then tear their hair out as they try to jump through all the hoops.

That’s right. In America, although the government already has all of the information and could just send us a bill that we could dispute or correct, it doesn’t work that way. Instead, it’s up to us, who are generally not trained accounts or lawyers, to try to navigate these ridiculous forms, fill in the blanks, calculate what we owe or are owed, and hope to god we get it right the first time lest we suffer the wrath of the IRS.

So yeah. It’s a system that makes no damn sense at all. But let me explain it again in brief. Everyone I’ve worked for in the year and who’s paid me money, whether they withheld any taxes or not, has reported those amounts to the state and federal governments, as well as paid those taxes to them. So the U.S. knows what I made and what I paid in. So does my home state.

There is absolutely no reason that each of them could not just run the calculations, send me a bill, and then list possible exemptions and deductions I might qualify for. At that point, it would just be a matter of checking boxes to indicate filing status (single, married filing jointly, married filing separately, head of household), number of dependents, and other exemptions for being over 65 or blind.

Send that form back, amounts recalculated, and you either get a bill or a check. Boom. Done.

But the American Tax Code is huge and, well, not just limited to what’s in USC 26. That’s because statutes, regulations, and caselaw also effect tax code, so while the actual US Code covering the subject is only 2,600 pages more or less (and still longer than the Bible or War and Peace), toss in those regulations and caselaw and you hit a whopping 70,000 pages, or about 32 million words — which is 32 complete sets of Harry Potter books.

And why is that tax code so huge? Simple. CPAs, lawyers, accountants, tax preparers, and others need jobs, and they have a powerful lobby. They also have the company Intuit, makers of TurboTax, fighting hard to keep tax forms a nightmare so that people have no choice but to turn to them to do their filing — for a fee.

Yes, my taxes this year were a complicated nightmare, although I buckled down and did them myself at the last minute. The main complications all had to do with economic help we received in 2020 because of COVID-19.

One was because most of the Federal unemployment benefits we received were exempted from income tax, but it couldn’t just be left off of the income report. Rather, it had to go onto a secondary form which showed total unemployment, amount exempted, and remainder.

The other was because we were supposed to receive several benefit payments last year, the first for $1,200 for individuals and the second for $600. I got the first but not the second so, again, this involved filling out a complicated worksheet to determine that yes, the government owed me the money, then using none of that data to put $600 on a line on my tax form.

Anyway… the end result was that I wound up being owed a rather hefty tax refund for both State and Federal, something that hasn’t happened for me (by design) for ages. In fact, it’s over a thousand bucks in total. Wow.

I say wow because it feels like the government is suddenly throwing money at me ironically at a time that I don’t need it. I managed to land an amazing and very well-paying remote-work job with health insurance, I’ve built my savings back up from “Well fuck me” to five digits, and yet… I just got a random government check for $1,400, I’m going to get another for over $1,000, and it’s getting kind of annoying.

But, okay. My car does need a brake job, probably a tire pressure sensor replacement or two, and a general service and tune-up before an epic drive north for a friend’s wedding in October. Oh yeah — and lavish wedding gifts and room and tux rentals and shit.

And, I’m guessing that if he has a bachelor party at all, it’s going to involve either an escape room or laser tag or both, but that’s all fine with me. What’s not fine? Our really fucked-up income tax system here. So, tell me in the comments: How do income taxes work in your country?

Image source:  Hloom via Flickr / (CC BY-SA), 401(K) 2013

Hindsight really is 20/20

Here’s another piece from the past, this one from April, 2019. I’m just starting the slow transition back to working again after three months, which is going to be emotionally difficult. I just hope we’re not returning too soon.

There were three particular things that my parents did when I was a child that seemed random, but it wasn’t until years later that I had the sudden adult “A-ha” moment of realizing what was probably going on. By then, my parents were no longer around to ask, but I think I guessed their reasoning accurately.

The first one was me getting my Social Security card at seven years old.

Second was not long after that, and my parents decided to sell the suburban starter home they’d bought right after getting married in order to buy something fancier.

The last was a few years later, when my parents met with my dad’s uncles, none of whom I’d met before.

While these this may seem like normal family things, it wasn’t until I looked at other events that happened around the same time and had my “A-has.”

Getting social

First, the Social Security card. Before Ronald Reagan was president of the U.S., kids didn’t need SSNs. (I think the reason for the change was to prevent tax fraud via deductions for fake kids.) It was normal to only get one when you were going to start working, so the usual earliest age would be about sixteen for a high school job, although definitely by senior year, since it would be needed to apply for college and (gack!) student loans.

My paternal grandmother didn’t get hers until she was 35 — but that’s because that’s how old she was when she suddenly had to go to work due to circumstances that will become obvious below. Did I mention that my dad was on the older side when I was born? I should, because that feeds back into the whys later on as well.

Anyway, one day we go to a government office and I’m clueless, so I just scrawl my signature on a form and that was that. Eventually, this fancy blue card comes in the mail with my name, signature, and nine-digit number on it, although my parents quickly lock it in their infamous “metal box” that lives in our linen closet, apparently a repository of Important Adulting Documents. (Insert ominous musical sting.)

Were they going to send me into child labor or something? Nope. This was not long after my dad’s older brother had a heart attack well before he hit his 60s. He survived, but I think it put some sort of fear into my parents. It wasn’t long after that a special “heart health” diet from my dad’s doctor became a permanent fixture on the side of our fridge — although the way my mom cooked, it was obvious that “heart health” back then meant something entirely different — lean red meat, alcohol, sugar, and sodium were apparently A-OK!

What I realized years later was that the only reason they got me an SSN was as a preventative measure in case Dad wasn’t so lucky with his heart and suddenly dropped dead. I had to have the number to get the Social Security death benefit, so they were really just looking out for me.

House for sale

As far as them deciding to try to sell the house two years later, it wasn’t until I realized this was right after my youngest half-brother from Dad’s first marriage turned eighteen. As in no more child support to pay — and Dad’s ex-wife had remarried right about the time he did, so he never paid much in alimony. He was free and could afford a bigger monthly payment.

Sadly, we never did sell that starter home and move on up to a fancy two-story house with a pool that would be worth millions now but which was, relatively speaking, ridiculously cheap then. I’ve often wondered how different my life would be if that had happened. I would have changed elementary schools, and every other school I went to.

Say “Uncle”

As for the third “A-ha…” My dad’s uncles — aka my great uncles — fascinated me as a kid for a lot of reasons. First, they were the only male relatives of that generation on my dad’s side I’d ever met. One of the four brothers died when I was two. Meanwhile, my dad’s dad had been in a mental hospital since forever and I wouldn’t have been able to meet him until I’d turned eighteen.

He died when I was thirteen, but apparently it was on the horizon for a while, so I met my great uncle Glenn first, and he fascinated me because he was the oldest human I’d ever met: seventy-six. He’d been around to see so much history I’d only read about!

I remember Glenn coming to our house a couple of times, and then we went to have dinner with great uncle Rolland. He was the last born of the four brothers (well, four out of six who made adulthood) and was a decade younger than Glenn. I liked Glenn, but Rolland scared me for some reason. He just seemed… well, he seemed to have the same mean streak that my dad’s brother, the uncle who’d had the heart attack, had. He lived somewhere way out, like Gardena or Glendora or one of those towns that’s lost in the great urban-suburban sprawl that stretches between Downtown L.A. and the top of Orange County in one direction and between L.A. and Long Beach in the other. What? L.A. County is bigger than some countries. (97, to be exact.)

This was something else that gave me pause years later — that my parents drove that far to have dinner with him. See, my parents weren’t big travelers except for very special occasions. Hell, maybe it was an emotional thing? We lived less than five miles from where my dad’s brother and wife lived — literally the third freeway off-ramp after the on-ramp — and we only made that trip a few times, too. It was the same with other friends of theirs who didn’t live too far away, but we rarely visited.

But here we were, driving forever. And if you can’t make minor in-town trips for close friends or family, then what incentive, exactly, is making you go this far? I didn’t know then because during the dinner with Rolland, I distinctly remember being sent out of the room to “play,” which, of course, even at that age I knew meant, “Oh, they’re talking ‘adult stuff.’”

The content of that adult stuff became abundantly clear years later while my dad was in the hospital for the final time, I was in the house I grew up in alone, knew the location of the infamous metal box (and of the key) and took a look inside. That’s when I found the explanation for what had been going on.

I mentioned the bit about his dad being locked up in a mental hospital, but hadn’t known the reasons for it. I’d always assumed that grandpa was basically insane. But, according to documents in the box, he had abandoned his family twice, despite being ordered back by the courts after the first time.

When he walked out the second time while his kids were barely teenagers that was apparently enough for Grandma, who managed to get a non-scandalous divorce (probably the only way to do so at the time) and then got his ass locked up.

Why? Well, because, in that day, no sane man would abandon his wife and kids and, honestly, admissions standards for mental hospitals were a lot less stringent. (Q.V. American Horror Story: Asylum.)

He was in there for something like forty years. Meanwhile, Grandma went to work, invested her money in land, originally in the still-developing San Fernando Valley, and went on to have a pretty good life, retiring with her second husband to a 15-acre farm/orchard near San Luis Obispo, which was my favorite place to visit as a kid.

Anyway… around this time, grandpa had started to show signs of dementia, and of needing to be checked out of the mental hospital and into a nursing home, and my dad filed papers with the court asking to be exempted from any familial or financial responsibilities for this action, citing the above abandonment. I’m guessing that maybe his brother did the same, but this would have meant that the ball would have landed squarely on the shoulders of grandpa’s two surviving brothers, Glenn and Rolland. (Grandma avoided any responsibility via that long-ago divorce.)

So those meetings were probably some combination of my dad justifying his position and my great-uncles trying to resist or negotiate. Ultimately, I think my dad won, and my grandpa wound up being relocated to a nursing home not far from where Rolland lived. When my grandpa died, I didn’t see my father shed a single tear, although he lost it when his mom died — ironically two years to the day before my mom, Dad’s wife, did.

And, even more impressive, my dad managed to somehow win over the mean, nasty uncle although, to be fair, a degree of blackmail or coercion might have been involved, because certain jokes my dad and heart attack Uncle made back in the day pretty much telegraphed that the entire family considered Rolland to be an alcoholic, and this was back in the days when “Hey, that was funny!”

Or, in other words, not now.

How parents change

This got longer than I’d expected, but I hope that it inspires people to get introspective and ask themselves, “Okay, why did my parents do that thing they did when they did, and what didn’t I know then?”

It can be an interesting and very illuminating game, and you don’t need to limit it to wondering about your parents.

What apparently random decisions did your parents make when you were a kid that didn’t make sense until you considered them as an adult? Tell us in the comments!