What everyday taxpayers can learn from the Biden, Harris 2023 tax returns

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President Joe Biden and Vice President Kamala Harris deliver remarks about healthcare in Raleigh, North Carolina on March 26, 2024. Peter Zay | Anadolu | Getty Images Interest income can be a 'big surprise' In 2023, both couples earned most of their income from salaries, with federal and state taxes withheld from employers. Both couples also had interest income, which can cause a "big surprise" at tax time, without increased paycheck withholdings or quarterly estimated tax payments, explained David Silversmith, a certified financial planner and senior tax manager at Eisner Advisory Group in New York. That's why investors need to track taxable activity — such as dividends or fund distributions — in brokerage accounts, said Silversmith, who is also a certified public accountant. While both couples made extra tax payments, they each incurred a small estimated tax penalty, based on underpayments from each quarterly deadline and interest. The Bidens paid a penalty of $285, while Harris and her husband owed $451. Tax planning for self-employment income Over the years, the Bidens have reduced self-employment taxes by receiving some wages through their companies, which are structured as S corporations. After paying "reasonable compensation" to shareholders, S corporation owners can take distributions without paying 15.3% for Social Security and Medicare taxes. While the couple only made $4,115 in royalties for 2023, the structure has previously offered significant savings for the couple's book deals and speaking gigs. However, working-age taxpayers with self-employment income would need to consider how lower wages could impact future Social Security income, said Catherine Valega, a certified financial planner and the founder of Boston-based Green Bee Advisory, who is also an enrolled agent. Why that matters: The calculation for Social Security benefits uses up to 35 years of wages to calculate the monthly payments, she said. Work with a tax professional Typically, filers get a tax refund when they overpay levies throughout the year. Conversely, there's generally a tax bill when filers don't pay enough. Both tax returns showed the couples were fairly close on total taxes paid vs. owed. When filing returns, "plus or minus $500 [for a refund or balance] is magical," said Valega. "Both of them were spot on with that." If you're a higher earner with "a little bit of complexity," such as multiple sources of income, she recommends working with a tax professional to "dive into each piece of the pie."