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Lessons learned from being tax Peeping Toms

The hubby says my dream of a rural retreat, miles and miles and miles from other people is BS. I wouldn't be able to survive, he contends, without neighbors to spy on.

OK, maybe he has a point. I do sometimes seem like Gladys Kravitz's much younger sister. But, honestly, you wouldn't believe some of the things that the people on my block do! They are demanding to be watched!

I know I am not alone. Let's all be honest here. Humans are nosy.

That's why reality television rules the airwaves. Magazines full of quasi-celebrities fill store racks. Heck, our curiosity about others keeps the Internet in business.

In fact, we've recently had two examples of our nosiness when it comes to taxes, one unintentional and the other revealed willingly by the taxpayer. I looked at our tax Peeping Tom tendencies in both of these situations last week at my other tax blog.

Jock taxes and retirement savings: Let's start with the tax data that was revealed inadvertently.

Andrew McCutchen, the all-star-center fielder for the Pittsburgh Pirates, left a pay stub in Wrigley Field's visiting teams' locker room. It was picked up later by a Major League Baseball fan touring the Cubs' home and subsequently posted online.

McCutchen wasn't too upset about his pay info getting out. As he noted, the amount isn't a big secret and no personal data that could lead to identity theft was disseminated.

Thanks, Cutch, for being so understanding, since the details about that May paycheck, as you even pointed out, offer us a look at your myriad taxes. From there, we get several tax and financial lessons.

First, #22 also is an all-star when it comes to his pay. In addition to making sure he remits all the jock taxes due on his earnings in various MLB states and cities, McCutchen has his bi-weekly income directly deposited so he doesn't have to worry about it.

Maxing out post-work money: Plus, he maxes out his 401(k) contribution.

Some online examiners of McCutchen's pay stub slammed the multimillionaire for putting only $1,500 away in his workplace retirement account.

But paycheck size doesn't matter here. McCutchen is bound by the same tax law limits all of us are, which is a maximum of $18,000 in 2015 that can be contributed tax-free to a 401(k). Money put into a workplace retirement account beyond that limit would be taxed before going it's taken from his pay. Presumably, McCutchen can find other, better vehicles into which to put that extra cash.

As for his 401(k), however, he is putting in all the tax-deferred money that the tax code allows. Contributing $1,500 twice a month comes to $3,000. Multiply that by MLB's six months of regular season pay and you get $18,000.

Good job, Cutch. Now just be sure to stick your future pay stubs more firmly in your travel bag.

Investments, tax rates and refunds: The only people who give rich athletes a run for their money are politicians. Many of them are hoping to be elected president in 2016, including Carly Fiorina.

Fiorina is one of ever-growing field of Republican presidential nominee hopefuls. She and her husband Frank also are very rich, worth around $59 million according to the financial disclosure statement (one's eventually required from all candidates) she filed.

But Fiorina took a further financial step. She also released her 2012 and 2013 tax returns; no peek yet at her 2014 forms as she got an extension to file that 1040. 

Such tax filing revelations are common, but usually not until a candidate is his or her party's official nominee.

We can speculate on the political reasons for the early tax data. But I'd rather look at what we can learn from Fiorina's 2012 and 2013 taxes.

First, like most wealthy folks, the bulk of Fiorina's earnings are from investments, not wages. Investment earnings generally are taxed at a lower rate.

That's why, despite reporting income of more than a million both tax years, which would put her in the top 39.6 percent tax bracket if the money was ordinary, that is, wage, income, Fiorina has an effective federal tax rate of just 20 percent.

States' tax tolls: Her tax rate goes up about 10 more percentage points when you add in state and local taxes. And Fiorina and her husband faced a lot of state taxes. The couple had to file returns in no fewer than 17 states in 2013.

While that's a lot of filing, it's a situation more of us less wealthy filers also are finding ourselves facing, to a degree.

States and cities are grasping at every cent they can, meaning that if you worked in a state for a time, you owed its treasury taxes. Even if you didn't work there, but got money, say as telecommuting income or from rental property in the state, you still owe that state taxes.

The Fiorinas obviously can afford to hire a phalanx of accountants and tax advisers to ensure they don't get tripped up by multi-state taxes. For the rest of us, it requires paying attention and hiring tax help we can afford or hoping our tax software can help us sort through the requirements.

Then there's the matter of refunds. Fiorina overpaid Uncle Sam $159,122 in 2012; her 2013 refund was $128,978.

Yes, she and her husband had those refund amounts credited toward the coming tax year's estimated tax payment. But still, no one regardless of earnings should be giving the federal government an interest-free loan. 

Bankrate Taxes Blog logoYou can read more about Fiorina's and McCutcheon's taxes at Bankrate Taxes Blog. I usually post my additional tax thoughts over there on Tuesdays and Thursdays.

But if you miss them then and there, you can always find a synopsis and links here at the ol' blog on the weekend.

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