Comment by DanielBMarkham | Hacker News Reader

Comment by DanielBMarkham | Hacker News Reader

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When you're self-employed, there is no withholding. You simply write a check out each year (or each quarter, if you make enough) for your taxes.

This has the effect of making you very aware of just how much money is going to you and how much money is going to the government. With withholding, people never see the money they're losing -- hard to miss what you've never had.

In general, though, increasing withholding is exactly what I do when I work as a contract employee. But I rarely do that any more. At some point, your rate just doesn't fit into a W-2 kind of pay scale.

I'm in an interesting spot because my income can be zero, nadda, nil, or it can be upper-middle class. It's all up to me and the market. Most of the tax laws, however, are written with joe sixpack the wage earner in mind. So I end up making a lot one year, owing a bunch of taxes, and then when the bill comes I'm making zero. Then I have to choose between paying taxes and feeding the family. Or the flip-side, you borrow money when you're making zero and then you start up a high-rate job and have to spend the first few months paying back loans instead of getting caught up on back taxes.

But like I said, listening to others I'm sure there must be something wrong with me. Maybe I should find a more "normal" job where I could have deductions taken out instead of being so independent entrepreneurial,and self-employed.

... You should be putting tax money aside with each check you get, really easy. Open up one of the online savings accounts, and throw money at it. Right now I withhold about 30% of each check to cover all the various taxes I'll owe. Then I pay the minimum for quarterly taxes (to avoid the fine). Then, it's easy to write the check for your chunk of taxes at the end of the year, since you've saved it up.

You should have the discipline to not go raiding your tax bucket.... it's not your money.

You should have the discipline to not go raiding your tax bucket.... it's not your money

See that's where I have a problem. If I sell you an apple, and you give me five bucks, for some reason I have this feeling that the five bucks really belongs to me.

And yes, I understand the theory of how this should work, after all, I am not an idiot. I'm just explaining to you how it actually works. In reality, when you've got $40K in the bank for taxes and the gig is up and there's no money coming in, you're choosing between taxes and living for a year. Maybe you can sleep better at night paying taxes, but I've got to take care of my family first.

It's not your money. How are you planning on taking care of your family when you're in jail for a few years on tax evasion?

Anyway, come on... you're saying "I'm going to skip paying taxes so I don't have to work for a year"..... how does that make any sense at all, and how is that a defensible position?

How about you take the $100k you made on your job (then put away $40k) and learn to live on it?

I know I sound like a dick, but you're advocating not paying taxes, just because you'd prefer not to. You're obviously a smart guy, posting on hacker news, talking about taxes, you'd have no problem finding a job that keeps your family eating and in a house.

So let me see if I understand you.

You think that if I have money in the bank that is owed for taxes, I should pay the taxes even if it means not having food on the table. That since I'm "obviously a smart guy" that I should find work at some place based on your criteria (one supposes that criteria would be "make enough to pay taxes, you schmuck") instead of having the freedom to negotiate a contract and situation that is more productive to me and society in the long run? So my obligation on taxes is greater than my obligation both to my family (to find the best job possible and to support them during times of non-work) and to myself? (to have the freedom to spend money I have in the bank in a priority that I set, even if it means risking higher debt and fines later on)

Nobody is skipping taxes. Nobody is advocating not paying taxes. I've yet to have not pay -- eventually. I'm simply describing how easy it is if you are a non-standard wage earner (like a startup entrepreneur) to get hosed up in tax liabilities. People don't fit into the little boxes that tax policy wonks want them to. That's the point.

I grew up with the idea that the people owned the government, not the other way around. It seems that your feeling is that taxes are such an obligation that they should come ahead of personal preferences for work. That folks should take jobs wherever they can find them in order to fulfill their tax obligations.

Ok yes, I've rehashed what I think you're saying and it's true: you sound like a dick.

Care to rethink any of that? Or did I misunderstand?

Ok. So what you're saying is that you have a profession which has long dry periods in between lucrative jobs. Also, that you don't have the planning skills to have enough in the bank to feed your family if things don't work out, and you have a longer period between jobs. So, you skip out on legal obligations (you know, paying taxes...) in order to make ends meet.

I'm saying that instead you take a pragmatic view of things, you pay your taxes, avoid jail time, and further ruin later (fines, interest, etc). Build up more of a cushion of savings, since obviously you can't count on your income. And consider the idea that maybe you should get temporary jobs to NOT STARVE if it comes to that.

Basically, our disagreement here is that you think that the money is yours the whole time, and that taxes are a separate bill, which you then don't plan ahead for. I propose that the money you set aside for taxes is no longer yours, it's in your keeping, but you are legally obligated to pay it (probably quarterly) to the government, in order to pay for all the societal benefits taxes provide (whole other argument).

I get annoyed that you make a ton of money (on the order of $100k), have the foresight to put aside the money for taxes, and then ... "whoops, I spent it all", and complain that you don't have enough to pay your taxes. You have a family sure, and a hard to predict job, but come on, you make way more than enough to feed them, and clothe them, and even pay for piano lessons. All while paying taxes.

Basically, our disagreement here is that you think that the money is yours the whole time, and that taxes are a separate bill

Yes. As a free and individual sovereign person I feel as if I own the money that I earn and I own the political power that I was born with. I choose to apply both of those assets to the best of my ability. I expect others to do the same.

Our government was founded on a tax revolt. Remember "no taxation without representation"? We, the people, are the original holders of money and power. Nobody else. If we reach a state where, god forbid, we are being taxed for more things we do not allocate our political power for, then -- something will happen. People will leave, new leaders will be elected, there will be a balanced budget amendment -- something. And if everybody had to write out those multi-thousand-dollar checks every quarter, there would be a lot more scrutiny than there is today.

And the day I let the government decide whether/where I should be working, in absence of a war, is the day that I stop being a voluntary citizen.

I find it interesting that your argument basically consists of impeaching your opposition (me). I'd argue that no amount of planning can eliminate the problem I've outlined. If planning could account for all economic conditions, how did the banks get where they are today? How come economists can't predict the economy four years out? I've had gigs that ran week-to-week for over a year and ended suddenly. If you've got some magic pixie dust that lets you plan a year out, I'd love to have some.

So yes, continue slamming me for the failure of your model to include reality. I'm a poor planner, I'm selfish, I have a bad attitude. One imagines the list is endless. Perhaps I am not a patriot as well? Who needs logic when simple ad hominem attacks work so well. (And it is ad hominem for instead of acknowledging that I am simply presenting a case for your consideration, you've focused this conversation on your personal opinion of my finances, morality, and planning -- none of which changes the nature of the debate and the only goal of which is to insulate yourself from thinking through this) Even if you are right, if people are naturally poor planners and selfish, etc, you still have to account for the fact that the system doesn't work. But you don't want to go there. You'd rather talk about how bad the people are.

Since this is where you've taken us, I think it's a good time to bow out.

Uh, I'm 100% not going to resort to ad-hominem attacks, but I don't think that, knowing that you are aware of the current state of taxes and fail to plan for them, I don't think you'll find a person on this board who thinks you're anything but a poor planner.

You're a new commenter to this thread, so I will try this again. Perhaps I've been poor at explaining it.

You're self employed. Let's say you sell services. It's the first week of the year.

The first week you did great. Let's say you made $5,000. Woo hoo! But wait, you say, part of that money isn't really yours. So what do you pay? Do you multiply 5K by 52 weeks in the year to assume an income? That's how most people's payroll taxes are done. So let's say you do that and immediately write a check for 1800 bucks for taxes.

Then you make nothing else the rest of the year. You've lost use of that money and you really needed it. Wrong answer.

Let's try again. Let's say you put it in the bank. Now you make another 5K. And another and another. After a month you've made 20K. 6K of that is in the bank.

Then there's no work for a month or two.

At the end of the quarter, you've got 6K in the bank for taxes. Do you write the check? Well -- what's your income going to be? You haven't made anything in two months. So you don't write the check. Then the next quarter you work every week. Wrong answer.

Or you write the check, and there's no more work for two months. Wrong answer.

Or you write the check and need a new server. Or you don't write the check and need the money. Or you get hit with another large business expense. Or somebody goes to the hospital. The randomness goes on and on, and without knowledge of just how your income is going to work for each week for the next year you're guessing at optimization strategies. Note that some of these unplanned expenses are tax-deductible events -- these are items you would take off from your income before taxes anyway. Some, of course, are not.

Allocating the money immediately doesn't work because there's no set amount to allocate without a predictable tax bill to prorate. Saving the money results in various scenarios where the savings conflict with other business realities and you've still got the prediction problem.

The most reasonable strategy that I can create is to pay some kind of guess and then catch up the following year -- after all, you always know what your taxes are for the previous year. But the fact remains that the tax system is made for people with predictable income where the employer takes the money out of their checks. And as the economy gets more diversified and more and more people run their own businesses, this assumption causes more and more problems.

I think calling all of that "poor planning" is a bit oversimplified.

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