T.A.X.E.S.

We had some bad financial news recently. It's taken me a little while to calm my nerves and write about it.

Hubby and I have been house hunting recently, with a plan to hopefully have enough saved for a down payment by the end of the year. It suddenly hit my husband that we should look into our taxes and what we could save by having an interest tax write off once we get a house.

In the process of doing this, he discovered that we have not been paying enough for taxes. WTF? For real? We were so good this year and claimed "married-zero" for both federal and state, so we thought we'd be getting something back next year, not having to pay!

Well, (hold on a sec, while I take a moment to calm myself...) we discovered that we're likely about $4,200 short on our federal taxes and at least $2,000 short on our state. AGHGHGHGHHGHGHGHGHGHHGH! We were both SO FRIGGIN' FRUSTRATED. How can you owe if claiming ZERO?

Our research showed us that by claiming "married" the government assumes that only one spouse is  working,  not two AND that you have multiple deductions - read: a house and kids. Yeah, that's not our situation.

So, I bit the bullet this week and had my taxes adjusted to have a bit over $1,000 extra put towards our taxes each pay period for the remainder of this year, so that HOPEFULLY, we'll end up breaking even.

By doing this, we've reduced the amount we'll have saved for our future home. Because of this, we've put off home ownership until next year sometime.Oh well. I'm a believer that everything happens for a reason and although we are disappointed about having to wait longer, it just wasn't meant to be right now and someday we'll understand why.

So, my advice for those of you who are claiming married-zero without any other deductions like us, you may want to look into what you've had withheld so far this year so you don't have to pay big time next year.

How can I owe MORE taxes?

Well, we are one week away from the final payment to our oldest credit card. I was basically walking on air yesterday, having just got the news that the positions I've interviewed for are moving forward in the process. Yayyy!

Then, we checked the mail.

Stinky, old mail.

Looks like we forgot to include something on our taxes from 2010. We had won a small jackpot on one of our casino trips back then. It was $3,000! It was the first and last time that ever happened to us. We didn't get anything in the mail to trigger us to remember to include it on our taxes, so we forgot.

The government didn't forget. They were notified by the casino and are looking for their 25%. $750. Oh, plus $31 for interest. A whopping $781 due to the government. Shucks.

Looks like I could file an amended return and somehow write off equal amounts of gambling losses. That's if we itemized our deductions. We've never had enough deductions to do that, so we've always taken the standard one. I'm not even sure that if we did itemize it, if it would just be a wash or if it doesn't work like that.

Part of me just wants to pay the $781 and be done with this. But, another part of me says that I should try to pull out our old taxes and file an amended return with itemizing our deductions and hope that the number somehow decreases. I'm not sure it will though and I don't really want to spend the time on it.

The bill will be considered "closed and paid in full" if we pay the $781 by June 20th. We will have the money. Sure, it was earmarked for something else, but we can make it work.

Sometimes it's worth the money to just put something behind you, ya know? I haven't made a final decision but that's how this is feeling right now. We'll see.

I'm happy for my fellow bloggers!

As I catch up on some of my PF Blogging Buddies blogs, I've noticed that some of you are actually getting refunds back instead of owing this year. Congrats! Even better, some of you guys are using these tax refunds to pay down your debt. That's awesome! Way to make good decisions.

Keep it up :-)

Final 2012 Tax Breakdown

I finished up our 2012 taxes on Turbo Tax today. After all was said and done, the final amount owed ended up being $5,901. $4,317 for Federal and $1,584 for State. It felt good to set up the payments via automatic withdrawal. One less check and stamp that I'll have to use! I enjoy being able to save money any where I can :-)

I'm happy psyched to put this bill behind us! Honestly, I can't imagine we'll have to owe again in the future. We have ABSOLUTELY no intention of ever changing our withholding again (it's at zero!) and it's likely we'll be eligible for some sort of deduction in the future (hopefully a home). I also feel good knowing that money from our paychecks can now be focused back onto paying down our debt.

I look forward to updating my debt breakdown next month when we've actually made some real progress! Stay tuned.

The Missing W-2 Arrived!

We are happy campers! My hubby's efforts to obtain his missing W-2 finally paid off. The Accountant that the company uses sent us a PDF last night. We were thrilled! It doesn't change things much (we will owe $5,865 instead of my estimated $6,007 - a sweet savings of $142!) but at least we don't have to worry about reporting the employer to the IRS and completing the form with our guesstimated numbers. Yippee :-)

2012 Taxes!

So, I don't want to jump the gun or anything.... but I may not owe on my taxes next year! I received an email today that Turbo Tax opened up their 2012 tax forms online. I had already calculated out what my W-2 "should" look like by the end of the year, so I had the basic numbers all set to input. Imagine my surprise when the top right corner, where a possible refund could be, actually had green numbers up there!

I have been dreading, planning, and anticipating seeing the evil RED numbers showing how much I would owe. We have it budgeted to set aside around $4K for taxes next spring. Holy crap, we may not need to do that! I would honestly be happy to break even and just not owe, that would mean we are doing it right. I was so nervous because of the fiasco we had earlier this year where we ended up owing for the first time ever - $7K in taxes! Because I had to play with my deductions so I could come up with the money to pay those taxes, I was sure I screwed myself into having to owe again. It looks like that may not be the case.

I won't count my chickens before they are hatched though, my quick calculations didn't include the hubby's income from this year. I'll have to play around with what he made at each job (3 of them) and enter that in too. That could be a game changer if it bumps us up to a higher tax bracket. We'll see though. For today, I have a smile on my face, thinking of other things we could do with that $4k instead!

Taxes... AGAIN!

Something told me that I should do a check up as to where I am with my tax withholdings at this point. I decided to look at the total taxes withheld on my W-2 from 2010, compared to where I would be if I continued to withhold what I currently am, through the end of 2011. Oh oh, I smell trouble! From the looks of it, I would be very close to what I withheld last year. We all know where that got me (read here if you don't)... owing $7K+ in taxes.

I know how it happened. In an effort to get the taxes paid off quickly this year, I had basically nothing taken out for 5 paychecks. I thought claiming Married, Zero for the remainder of this year may balance things out but from the looks of it, it won't. Unfortunately we don't have much for deductions really since we don't own a house or have children we can claim.

I refuse to be stuck in the same situation I was last year, where I had to scramble to get the money to pay the tax man. I don't want to do that again. I won't do that again.

This leaves me with no choice but to adjust my withholdings now. I'm going to have an additional $360 withheld each pay period. There are 10 more paychecks left this year, so that will be an additional $3600 going towards taxes. I'm not even sure that this will be enough but it's all I'm willing to do right now. Anything more will impact our debt repayment schedule more than I'm willing to do.

Hopefully this will be a wash, but if not, at least I'll owe less. Just when you thought it was safe to let your guard down. Better I discover it now than when it's too late to remedy.

IRS Interest & Penalties

So, I thought that our IRS payments were done but unfortunately I received some mail this week that we owe interest and penalties since we didn't get our payments in by April 18th. The amount shown didn't reflect that they received our final IRS payment, so I decided to call to speak with someone directly about how much we really owe.

After about 30 minutes on the phone, it turns out they did receive our payments, totaling $5,272. The amount for us to pay now is "only" $32.89. I know in the grand scheme of things, it's not that much. I'm just kinda bummed because I have to tweak our budget to find out where that money is going to come from.

Luckily the hubby has been selling some items on Ebay, so hopefully (if it's enough) I can transfer those funds into our checking account and won't have to worry with pulling the money from somewhere else. June has just started, I'd really like to finish this month on budget! We'll see :)

It's so close, I can taste it!

Next Friday – May 13^th (oh crap, now that I wrote that I’m getting a little superstitious, but I digress…) Next Friday we will make the final payment on our taxes ($2472) and pay off one of our credit cards ($952) – I am so excited! We are finally moving in the right direction. It's such a great feeling!

As I shared before, I was slightly torn on paying the credit card with the highest interest first or this smaller one to get us going and I'm really glad I decided to pay this one. I NEED to cross something off of our list, even if it's relatively small, compared to the others. In this regard, I agree with Dave Ramsey's Snowball Theory. The interest that I will pay on the other card really isn't that much and the great feeling we'll get from knowing we're paying stuff OFF is going to be worth it!

Have a good weekend all :o)

Taxes... one down, one big one to go!

So today we paid our state taxes off! $1,794. Done. The check is sent in and this bad memory is behind us! I felt good writing the check out and dropping the envelope in the mail. Now we're focused on paying off the IRS. I can only imagine how good that one is gonna feel! It's going to take a little longer to get that one in since it's $5,272. I plan to send in what we can before the 18th and then our stretchhhh goal is to pay the remainder with my last check this month on the 29th. However, that may be challenging with our upcoming move (and the costs associated with that) so luckily we have some time since our grace period takes us until the beginning of June.

I'm hoping this good feeling continues and we stay motivated to follow our budget and continue to pay things off! Now that we have an end date (December 2012) there is some light at the end of the tunnel.


Lesson Learned : Don't mess around with your tax withholdings, it's not worth it! You'll probably end up owing later...

Owing taxes may be a good thing for us!

I know this may sound crazy, but owing taxes may be a good thing for us! I have been a bit hesitant to mention this but we've been struggling to stay on our budget each pay period. For one reason or another, we tend to stray. We have the best of intentions but "being good" has been harder for us than we anticipated.

Don't get me wrong, we have definitely made some progress from where we were previously. I actually have a "plan" that we are supposed to follow now (which is progress) and we've made some dents in our debt, just smaller than we could be making. Until now, we would kind of look at the plan but then make other decisions...

For whatever reason though, I refuse to pay the government late. I do not want to go on a payment plan and be hit with penalties and late charges. Eff that! It's not happening. This mentality has forced us to follow our plan to the T these past two pay periods. I know it may not sound like much, but I think THIS is the kick in the *** we needed to start following the plan. We have 5 more pay periods where we HAVE to follow it exactly or we won't make it. Maybe it's our procrastinator mentality that is forcing us to now conform at the last minute, maybe we get off on the pressure and the idea of the tax man coming knocking on our door, I'm not sure what it is - but it's working!

My only hope is that a habit will be formed by the time this is done, that we will continue to follow the plan and get ourselves out of this mess. One can only hope, right?

Question : What was your "A-ha moment" when it came to your debt? When did you decide it was time to take action and was it then that you actually started really doing it, or was it later because of something else?

Ouch... taxes!

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!