taxes – The Good Humored Accountant

February 26, 2026

Tied the Knot? Your Taxes Just Got Interesting!

So you got married. Now what? Easy there, this isn’t that type of article. We will keep our marriage advice and recommendations strictly to the tax realm

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But seriously though, I’m sure, right at the top of your concerns is how getting married will impact your taxes. The first thing is that you can’t file as single status anymore. If you are married on December 31st, you have to file with one of the married status designations – jointly or separately. What’s the difference you ask? With a married filing jointly (MFJ) status, you file one return together, reporting both of yours and your spouse’s income and deductions together. Under married filing separately (MFS), you will each file a separate return, reporting your share of income and deductions on your own separate returns.

Next Question: why does it matter? There are a couple of different reasons why it matters. MFJ filing status generally has better tax rates across the board than MFS. If you are looking at only tax savings, MFJ is almost always the way to go because you will pay less combined tax. If you take a look at the tax brackets and how they increase as income increases, MFJ gets broader tax brackets that go up more slowly than MFS. MFJ also gets a higher standard deduction than you would get as MFS. MFS also has to choose the same deduction method – standard or itemized- regardless of which one works best for each taxpayer.

So why would someone choose MFS then? It is usually for a reason that falls outside pure dollars and cents. When you file MFJ, both you and your spouse are liable for the full tax obligation and what is reported on the return. It isn’t split 50/50, you both are legally required to be sure the full amount is paid. If there is potential fraud on the return, both taxpayer and spouse can be liable. Maybe that isn’t what you want. Sometimes, taxpayers will choose to file separately for student loan repayment reasons to keep payments lower based on income. If one spouse had significant medical expenses, it could make sense to file separately if that spouse would have a lower AGI, allowing more of those medical expenses to be deducted since expenses have to be over 7.5% of your AGI. MFS is often a good option for spouses who are going through a divorce that is not finalized yet. It largely allows each spouse to file a return mostly independent of the other.

This choice can also be important for how it impacts many of the tax credit we discussed in our last installment. Do a quick dive HERE . In general, the earned income credit is eliminated for MFS taxpayers, since all income could in theory be on one spouse’s return while one taxpayer reports below poverty level income. The Child and Dependent Care Credit is also virtually eliminated with a few narrow exceptions. Education credits and Adoption credits are also largely disallowed

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So, think carefully when choosing to file separately if you are married. The tax man can bite you.

Here are some real like examples of when married filing separately might make sense: One Spouse has significant medical expenses – perhaps one taxpayer is undergoing cancer treatments and has significant out-of-pocket medical expenses of $25,000+ but has low taxable income from being unable to work. Since medical expenses are an itemized deduction and only expenses in excess of 7.5% of AGI qualify, this might be a place where married filing separately makes sense, to maximize itemized deductions.

You want to keep tax liability legally separate: Perhaps one spouse owes significant back taxes, has defaulted on student loans, or has a tax lien. Filing separately allows the spouse of the taxpayer to maintain separate legal liability and protect her/his refund from the IRS. If the couple were to file jointly, the IRS would claim any refund entitled to the spouse to satisfy the outstanding debts.

So, how do you change your filing status? If you are going from joint to separate, you can simply file 2 separate tax returns reporting each share of your income and deductions. You split any items that are reported jointly, in most cases. You will also need to both choose the same deduction method as mentioned earlier – either you both take the standard deduction or you both itemize your deductions. If you are going from separate to joint status, you file one return, check the MFJ box and report all of your income and deductions together on one return. To go back and change prior years, you have to file amended tax returns. Generally, you can go back and amend from MFS and change to a joint return, however, you are not permitted to amend a joint return and change to MFS once the due date of the original return has passed.

In conclusion choosing how you will file your tax returns is an important decision that can make a major financial difference but at the same time, can also expose you to risks, depending on your circumstances. As a general rule, married filing jointly produces a better tax result but there could be other financial and legal factors that may drive your decision to file separately. As usual, this is a blog and not tax advice. If you have questions about what filing status makes the most sense for you, consult a tax professional who is experienced in these conversations. They will be able to help you weigh the various factors and put to numbers to paper regarding what make the most sense for your particular set of circumstances.

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January 27, 2026

Top Tax Credits to Save You Money This Year

In our previous installment we talked about the difference between tax deductions and tax credits. You can check that out here {Blog Post Link}. In short summary, tax credits reduce your tax liability dollar for dollar where deductions reduce the income your tax is calculated on. The world of tax credits is vast and varied. In this particular post we will hit on some of the most popular/claimed credits, how much they can make a difference, and some of the qualifications to claim them. This will be a primer and is certainly not an exhaustive list. Even I don’t want to sit and read an exhaustive list of tax credits. I might do it, but it isn’t the most interesting reading in the world.

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To kick things off, we will start with maybe one of the most mis-claimed or misunderstood credits – the Earned Income Credit (EITC). The EITC is a tax credit intended to provide benefit to lower income tax payers and can actually be refundable. What does “refundable” mean? It means that even is your don’t actually owe tax or have withholding, you can still get a tax refund of this credit. {Sweet} The credit is based on a percentage of your earnings and factors in other financial information, like your filing status, how many dependents you have, what kinds of income that you have, and some other specific tax items. If you make over $68,075 and file a joint return or $61,555 filing as single/head of household, you won’t be eligible for this one. For 2025, the maximum credit is about $8,000 and is also fully refundable. To claim the credit, you can file a Schedule EIC along with your annual Form 1040 – you know, your annual tax form.

Another popular credit is the Child Tax Credit (CTC). The CTC is easy to identify. It is a flat per dollar amount per child that you have under the age of 17.

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In July of 2025, President Trump’s One Big Beautiful Bill (OBBB) – could we have any more abbreviations? – increased the 2025 credit amount to $2,200 per eligible child, indexed the credit to increase with inflation, and added some requirements about the parent and child having valid social security numbers. You must have earned income to claim the credit and if you make over $200,000 as a single filer or $400K for jointly filers, you aren’t able to claim the credit.

Next up on the list of credits you never knew you wanted to know about are Educational Tax Credits. There are 2 different credits designed to support taxpayers with post-secondary education costs – the American Opportunity Tax Credit (AOTC) and the Lifetime Learning Credit (LLC). Both credits are designed to help with higher education costs. The AOTC is the more generous credit of the 2, designed to help only with the first 4 years of college tuition. You must be at least a half-time student and the student can be you, a spouse or a dependent. The maximum credit amount is $2,500, with 100% of the first $2000 being eligible for the credit and 25% of the next $2,000. Up to 40% of the credit can also be refundable. For the LLC, the qualifications are lower. The eligible student is required to only be enrolled in one course during the calendar year. The LLC is available for all years of post-secondary education, including masters and beyond courses, for an unlimited number of years. The maximum credit annually is $2,000 but is calculated at 20% of your tuition costs up to $10,000. It is not refundable. As with most credits, if you make over $90K as a single filer or $180K married filing jointly, you can’t claim the credits.

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The last group of credits we will discuss are energy credits that help the environment. You can claim small credits related to energy efficient improvements to your main home as long as that home is in the US. The credits are based on how much you spend and are generally capped at $200-$500 but various items can qualify like new windows, insulation, interior and exterior doors, HVAC systems, or hot water heaters. If you decide to install larger energy items, like solar panels or a geothermal heating system, you can actually claim a tax credit up to 30% of the cost of the improvement. You want to be sure you check and make sure whatever you are doing meets the requirements, but don’t miss out since they can make a difference.

This list is by no means exhaustive and primarily touches on a few common credits available to individuals. Business owners have access to a host of other credits like the Research & Development Tax Credit, various employer/employee related credits, retirement plan credits and many others.

You may be thinking, “Great – now what do I do?” How do I get these credits? Are they on a card or something? To claim these credits, you file and report the required info on various forms as a part of your annual Form 1040 tax return. Each credit type will have a corresponding form or Schedule and outline what information you need to include in order to properly claim and support the credit. Be sure that you maintain any documentation necessary to support your credit claim in the event the IRS asks for it, particularly if regarding the EV vehicle credit. This isn’t one we talked much about due to changing laws, but as with all credit, be sure you can back up the claim.

A few things to keep in mind, if you think you may be eligible to claim any tax credit, be sure that you either consult a qualified professional or thoroughly review the instructions to be sure you meet requirements of the credit. You don’t want to be claiming credits that you don’t actually qualify for. If the IRS catches it, your credit claim could get denied and you might end up owing penalties too. Nobody wants that. This wraps up our discussion on credits. Be sure when filing your return that you are maximizing everything available to you. Don’t let the G’men be keeping your money.

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February 27, 2024

Estimated Tax Payments: What are they and How to be sure you aren’t behind?

One question that I get a lot from clients relates to confusion regarding estimated taxes. I get this question most often from taxpayers who have been employees for most of their careers and for whatever reason find themselves self-employed, either full-time or by just having a side gig.

Generally the questions fall around: “Do I have to pay quarterly estimates?”, “When are they due?”, and “How much do I have to pay?”

I’m going to lay down a “brief” primer on estimated taxes and why, primarily self-employed people, have to pay them.

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The Feds require all taxpayers to pay in both Income Tax and FICA taxes throughout the year as you earn your income. Taxpayers who are classified as employees (those that work for “the man”) have both of these taxes withheld by their employer before they ever get paid .

This is a pretty crazy development that we accept as the governed in that you agree to work with an employer for money and before you even receive it, the government carves out their share first. I don’t want to stand too long on this soap box. So, employees have their taxes withheld and remitted to the government by their employer every pay period, generally.

For those who are self-employed, the government does not yet have a practical way to get their hands on the funds nor appropriately assess how much to withhold since self-employed taxpayers pay tax on their net income (income after expenses) rather than their gross income (cash that comes in the door). Since self-employed taxpayers don’t have withholdings they are required to make tax payments every quarter for what they expect to owe. This is how we get the term “Quarterly Estimated Tax Payments”.

Taxpayers are required to reasonably estimate how much tax they think they will owe when filing a tax return after the year closes. Again this process is more difficult for a self-employed person rather than the employee. A self-employed taxpayer may know how much gross income they have in a quarter, but the net income may be completely different depending on what expenses they incurred to generate that income. These expenses reduce the amount of income they are required to pay tax on. FICA taxes complicate matters further. For employees, the FICA tax responsibility is shared between the employee and the employer, with each group remitting half of the tax. In reality, the employee bares the cost of the full tax, they just don’t feel it. Therefore it is accepted. One half of the tax is paid through direct withholding of the employee’s wages, the other half is indirectly paid by the employee in the form of suppressed gross wages that they never see because it is a cost of employment to the company. This unseen half is remitted to the Feds by the employer. For the self-employed, they are directly responsible for both the employee and employer portions and this is reported to the IRS annually as a part of their income tax return.

Since knowing what you are going to earn on a net basis may be difficult to predict, the IRS “offers” what are referred to as “safe harbor” calculations whereby, if you pay these safe harbors amounts, you will not be assessed any penalties for the underpayment of tax, even if you owe when you file your tax return.

The most commonly used safe harbor is related to the prior year tax. If your adjusted gross income (a tax return calculation) is less than $150,000, then as long as your estimated tax payments total at least 100% of the tax owed in the prior year, you will not be assessed a penalty for underpayment of tax, even if you owe $1,000,000. If your AGI for the prior year is over $150,000, then you have to pay 110% of the prior year tax to be eligible for this safe harbor.

The other safe harbor is much more subjective. You have to pay in 90% of the tax for the current year to avoid penalties for underpayment of tax.

So, when are your quarterly taxes due?

Payments are due to be sent by calendar year taxpayers (most everyone) on the following schedule:

April 15th

June 15th

September 15th

January 15th (following year)

These dates are adjusted forward if they happen to fall on a holiday or weekend.

Underpayment penalties are assessed on a daily basis, for each day and amount of tax that you are underpaid. When you file your return, the IRS generally assumes that you earned your income steadily throughout the year. If you have a highly seasonal business where the bulk of your earnings occurs in the 3rd or 4th quarter, you can fill out the schedule as part of the Form 2210 for calculating underpayment penalties. This will tell the IRS, “Hey, I didn’t earn my income evenly and I’m not underpaid.”

Still with me?

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I hope this helps you keep up with your tax payments when you start your own business or even a side hustle. When you want more info on tax impacts of side hustles check out my prior post HERE

Leave your tax questions or a personal story about estimated taxes down in the comments below. We will what kind of future post I can cook to answer them. Thanks for reading!

May 13, 2022February 20, 2024

3 Simple Ideas to Prevent your Side Hustle from Being a Tax Debacle

It seems everyone is looking for a little extra cash these days, particularly with the price of gas going up just a tick.

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One common option people are turning toward is the side hustle, taking underutilized skills or time outside of their day job and generating some extra cash.

Having some extra cash is great, but at some point, you get around to the question: do I have to pay taxes on my side hustle money?

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Survey Says – Yes, its taxable. That is the IRS default position on most income. As an example and not an idea endorsed here, the IRS maintains that even income derived from illegal activities is still subject reporting and income tax. The number one story told to all accountants in every fraud course, is that it was the accountants who took down Al Capone for tax evasion on his illegally earned income, not the actual racketeering or murder.

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So 3 things we are going go over today:

Income and Expense Tracking
Self-Employment Tax
Tax Form Reporting

I will sell you the whole seat, but all you will need is the edge.

Income and Expense Tracking. Reporting income from a side hustle is different than dealing with income you may receive from a job where you are employee. You will need to have a method for keeping up with payments you receive from you customers, even if it as simple as a piece of paper. Sometimes, it is easy and done digitally, like for Uber drivers, but at the end of the day you are responsible for reporting all of your income. If your side hustle is service related and you collect $600 or more from a single customer, that customer is required to send you a form 1099-NEC (Non-Employment Compensation). This will aid in helping you, but it will still be your responsibility.

On the flip side, you need a method to keep track of your expenses. Possible options could be as simple as paper or Excel, or there are numerous, easy to use accounting software packages to help you. (If you sell an accounting software and would like to sponsor this post, I am accepting sponsorships.) Keeping track of your expenses is extremely important as they will help minimize your tax burden. Have you ever heard the term “write off”? This is what that is.

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Self-Employment Tax. Income from side hustles falls into a different category of income than employment income. Side hustle income that we are talking about here is generally going to be considered self-employment income. Rather than being employed by a company that hires you as an employee, you are working for yourself. All businesses large and small are required to pay taxes based on the wages paid to their employees. These taxes go to fund Social Security and Medicare programs and are equal to 15% of your wages, up to various limits. I’m not going to bore you with limit discussions here but they exist. When you are an employee, this 15% tax is shared by you and the company you work for. The piece you pay directly is withheld from your paycheck and then company pays their other half to the IRS . When you are self-employed, you have to pay both side of the tax, out of the gross income you have collected from your customers. We could go into a discussion about how you really pay both sides of the tax as employee as well, via a reduced gross salary to account for your true cost of employment by the company but that is a soapbox for another day. Long story, but the self-employment tax can feel like a big bite of your earnings. The good news is that is it calculated on you net income (gross income minus expense) rather than your gross income. This is where those expenses come in handy we mentioned earlier.

Reporting. If you haven’t set up an organized company (See here for more on that), you will need to file a Schedule C with your income tax return. The Schedule C reports both your gross income and expenses while calculating your net taxable income. You will pay both income tax and self-employment tax based on the net income from your Schedule C. When you get paid from a company as employee, you most often have your all of your taxes withheld, both income and employment, before you ever even get paid. With Side hustle money, nothing has been withheld. This will unfortunately make your end of the year tax bill higher. A good rule of thumb in order to make sure you have some money set aside to pay your taxes at the year-end is to save about 25% of your gross income, until you have a good idea how much tax you have to pay.

Side hustles are great way to earn some additional cash, especially with companies like Uber, Door Dash, and other gig economy based apps in the marketplace. Even sites like Etsy are helping people use their skills to create fun unique items and bring them to a bigger market. Being prepared to deal with potential issues, like taxes, before they become a problem, will make that extra cash even better, rather than it becoming a big headache come filing season. Until next time: