I procrastinated filling taxes this year again…no big deal. Late filing seems to be common practice for those of us who usually owe money each year. The pain came when I received word that we need to file for extension and pay DOUBLE the normal amount to the fed and the state. I was shocked. I saved and paid quarterlies the same as I did the last five years and we got killed worse than normal. Now I am trying to figure out what happened and recover.
A Little History
Every since we got married we have owed thousands of dollars in taxes each year. The only times we haven’t owed are tax years when we were able to claim the adoption tax credit(a beautiful thing). The main ‘problem’ is that The Rockette has worked full or part time since we got married and from what I can see the tax code tends to not be as helpful to married couples with dual incomes.
The Rockette now works part-time as a consultant which means we are responsible for paying quarterly taxes. The same holds true for my internet income streams. Like previous years I paid less in quarterly taxes, because I would rather keep my money for as long as possible rather than overpay and let the government hold without having to pay interest. It’s purely principle, not necessarily a wise personal finance decision. It gives me a false sense of power in a situation were I am powerless.
Skip Forward To The First Year Without A Mortgage
This year is our first full year of being 100% debt free and renters. This means we lost our mortgage interest and property tax deductions. Ouch! I hadn’t really thought about the tax consequences, and I definitely wasn’t prepared for that loss to cause a doubling of our tax bill.
Ready for Pain
The lucky part is that we are ready to handle the pain. We had already saved normally, so we had half of the bill sitting in a ‘2010 taxes’ account in ING. The rest of the pain was minimized by the hard work we put into become debt free and having an emergency fund. Because of that, the tax bill became a nuisance rather than a catastrophe. In the past this would have thrown our life and finances into a tailspin. It will take a little while to replace the money the emergency fund, but that is nothing compared to the damage and stress it would have done to us 6 or 7 seven years ago.
Listen To The CPA
One of the benefits of a of having a CPA is I will receive an adjusted quarterly schedule when my taxes are finished that will take this into account and factor in a new child. If I had of followed the CPA’s recommended schedule this year, we would have been almost in line with were we expected to be. I need to start fully trusting the CPA rather than still trying to partially follow my hacked together plan of years past.
Thanks to the emergency fund, we can learn and move on. I have bigger and better things to worry about! I am ready to start my next web project which you will hear about in the future.