Why would you expect lower taxes?

For years, I looked forward to the day when filing an income tax return would be simpler and less painful, but this year's struggle with my 2017 tax return has shown me that nothing associated with taxation ever gets simpler.

I had anticipated having a lower tax bill in 2017. After all, I worked for only half the year. My small pension and Social Security income were unchanged, so I should be paying less in taxes, right?

Not really. Even after a serious drop in income, we still had to pay more than $800 to the IRS. At least that was down from the more than $1,000 I had to pay last year. What really surprised me and galled me was the estimated tax I am having to pay this year. I fell into the estimated tax trap three years ago, when I began receiving Social Security income (on top of the small pension I took the year before). Although I had taxes deducted from my SS payments (and the pension), that extra income threw me into a higher tax bracket. The IRS requires individual taxpayers to pay estimated taxes if they owe more than $1,000 at the end of the year. If you fail to pay estimated taxes, the IRS will not only collect the extra taxes you failed to pay but will impose a penalty for underpayment. For 2018, I will have to pay an additional $200 per quarter in estimated taxes, even though I will not be receiving wages for the entire year.

My wife (we file jointly and always have) is still working, but my only income this year will be the pension and SS. The only positive is that we should receive a huge refund on 2018 taxes, assuming no major changes, for the first time in decades. My wife tried to calm me down by pointing out that we no longer have dependent children to claim, we have no mortgage interest (paid off), no child care credits or other deductions except for charitable donations.

The big unknown in all of this is the impact of the December 2017 changes in the tax law. That's the law that was supposed to give all middle-income taxpayers lower taxes. I'm not sure we'll benefit from this. Our tax rate will be about what it was before, according to an online chart I found. The big change is that the standard deduction will rise to $24,000 for joint filers. Although we give a lot of money to charities, we don't quite exceed $24,000, so the tedious work to retain donation records and record each donation in the tax return (I use Turbo Tax) will be eliminated; itemizing deductions will not be advantageous.

I was not counting on a big tax break for 2018, but I certainly wasn't anticipating a big increase in estimated taxes (I had hoped estimated taxes would be eliminated because of our lower combined income). Last year's tax proposal was originally touted as a tax simplification bill. 

Nothing about taxation is simple.