What a week it's been so far... and it's only Wednesday! Well, the week started off pretty good. I found out that I will be getting a pretty good salary bump (11%). I was really happy when I heard that news :) I immediately started tweaking the budget spreadsheet and found that I could get our debt repayment this year up to around $26K! That's assuming we stayed on course for the remainder of the year, which I am bound and determined to do!
Then my husband got his W2 and I entered it into Turbo Tax. Yeah, this is where things went horribly wrong. The numbers in the corner started changing and turned from green to red. My worst fear. I had an idea that we may owe a little this year because earlier in the year we were looking at buying a home because the tax credits were so good. We did a silly thing and I changed my payroll with-holdings to almost nothing. We were trying to come up with the required down payment to get us into a house and figured we were going to get the tax credit later anyway. Well, that didn't happen. We decided to hold off on buying a house. In addition, I cashed out my old 401K plan and although I requested taxes to be taken out, unfortunately they didn't take enough. At the end of the day, it looks like we'll owe about $7K in taxes! Hold on a sec, I just had to swallow some vomit. I'm making myself sick over this. So, my change in salary is pretty much completely eaten up by us owing taxes. What a bummer.
I have to give my husband credit though. He mentioned to me that this may happen earlier in the year and told me I shouldn't reduce my with-holding but I did it anyway. I've never really had to pay before so I thought I'd take the chance. He's such a positive guy though and forward thinking that he's trying not to let me focus on the mistakes of the past. But ouch, it's so hard not to!
So, I'll spend the next few weeks trying to think of ways to get the taxes we owe down, but at the end of the day, we'll probably end up having to pay it. How's everyone else doing with their taxes? Misery loves company!
Ohhhhhh how awful!!!! Glad you started filing process early so you had time to problem solve!
ReplyDeleteWell we are in the same boat - except TurboTax tells us that we owe $8000. Boo! I am not really sure how this happened though.
ReplyDelete~Ella
Ugh... I remember having to pay taxes on when I cashed out my 401K - horrible memories. I had to make payments.
ReplyDeleteI'm hoping we won't have to make payments, I've heard that the penalties are high :(
ReplyDeleteI just found out that the hubby didn't take out withholdings, so I really hope we're not ging to have to pay and will still get SOMETHING back...even if it's only a couple hundred dollars...
ReplyDeleteWe had to pay a huge sum in taxes one time years ago, and had to take out a loan in order to pay our taxes. After you have gone through this experience you never want to go through it again.
ReplyDeleteBelieve me I remember how even before we took out the loan we were eating bologna sandwiches and tuna fish all the time just to try to get half of the money before it was due.
Since then we figure out how many withholdings we need to take in order to break even. I don't want to risk it anymore.
This is a real shock to you but as someone mentioned thankfully you figured this out early in the year and you have time to figure out how you will face this challenge. Don't panic. Sit down and see what you can come up with and figure out a plan.
I know it's hard - I have been there.
I've thought a lot in the last few days about what I posted. I didn't really offer you any advice or help and I've been wondering how you are doing having to deal with this unexpected large expense. Update us. Maybe we should try to come up with ideas on ways you can deal with this situation.
ReplyDeletePost soon to let us know.
Hi Martha,
ReplyDeleteThanks for asking. So far by tweaking the budget a bunch, we're able to come up with about $5500 by 4/18. Short about $1500 from where we need to be. I've been looking around the house for items we could sell but haven't come up with much yet. My husband has asked to take on additional hours at work so that should help a bit. Like you, we've started having our bologna sandwiches and tuna fish in an effort to reduce the food budget some. I'm holding out hope that we can pay it all off in April, but my husband thinks it's likely we'll need to do a payment plan. We'll see! Any additional insight or suggestions are appreciated :)