The Tax Man Cometh

Recently, I took the time to sit down and do my taxes.  I always tend to do them early because I want my refund check back so that I can do something with it.  I’ve opened savings accounts with it in previous years, and spent it on vacation as well.  I usually don’t have a set location for my refund, although last year it went towards debt.  This year I knew was going to be different though, because this is the first year that I’ve worked full time at a “real” job for a whole year (2009 I was full time for about half a year).

After talking with my dad a bit about my finances, he told me that I should plan on owing money this year.  I didn’t want to believe him, but decided that I should at least give what he said some thought – after all,  I didn’t want to get caught with my pants down.  So, I basically got it in my head that I was going to be paying taxes this year.  After I was filling in my W2 information (I use turbo tax, free online for simple returns), I put in my income (and for the first time I didn’t wonder where it went) and the number came up – $1250 or so.  I gulped pretty loud, but kept on going.  My dad warned me about not having many deductions, so I figured it was pretty much stagnant there on out.  After finishing my income (with some great tips from  Elle over at yakezie on my blog income).  I came to deductions.  There were quite a few deductions available, but unfortunately I was privy to very few of them.

Student Loans to the Rescue

That will probably be the only time during the year that I’m actually thankful for the interest that I pay on student loans, but they gave me a solid assist now.  The student loan interest was able to take my tax bill down to $750, where it ended up staying.  While I’m happy for the deduction, You’ll never find me justifying paying almost $2,000 in interest over the course of 12 months for a $500 dollar savings on the tax bill.  I’d obviously rather keep the $2,000 during the year and pay the $500 in April, keeping the extra $1,500 for myself.

I did have my vehicle registration to write off, but because I took the standard deduction it didn’t matter.

Make Them Wait

So, obviously this wasn’t completely out of the blue, but it will cut into my debt repayment and could hamper my goals.  Instead of dealing with it right away, I’m going to take a bit out of my debt snowball for the next 2 months and pay file towards the end of March.  There’s no sense paying them now when it will strain my cash flow and I’ll be paying interest money on loans during the mean time.  It’s not like the government needs the money anyway – they’ve obviously got access other sources of money.

How do you deal with your tax bill?  What deductions do you claim?

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About Jeff

Jeff is the founder of sustainable life blog and has been interested in sustainability for most of his life. After realizing in 2007 that his finances were a total wreck, he started reading financial blogs and quickly realized that what is best for your wallet is typically better for the earth, and is usually healthier. On sustainable life blog Jeff shares his journey to a more sustainable lifestyle. For updates, subscribe by email or like us on facebook.

Comments

  1. Robert Muir says:

    Since paying off the mortgage, I’ve only been able to claim the standard deduction plus whatever asinine stimulus credit they’ve been handing out. It sure simplifies tax prep though.

    Since I work for myself, I pay estimated taxes quarterly and hope that TurboTax and my thumbnail get the amount close to accurate. I converted some traditional IRAs over to Roth last year, so my payments had to be higher than normal. Painful yes, but having the Roth money growing tax-free in my investments is sure nice.

    I also have a Simple IRA that I’m going to keep as tax-deferred. That way I can invest more now and give me more options later when I withdraw.

    • Robert
      Sounds like you’ve got a great set up going there. I thought that I may have to pay quarterly taxes this year, because my job doesn’t with hold taxes for one of the states I work in. I havent done taxes there yet, but estimated that I dont have to pay.

  2. “they’ve obviously got access other sources of money.” Hehe, ya think?

    Since I do up my own payroll I manage my paycheque so that I break even at the end of the year. Saves a lot of hassle, unfortunately I can’t claim the interest on my student loan because it’s private nor am I allowed to claim mortgage interest. I was able to claim health expenses, tuition and donations. Might have a small refund because of that! It was my first year having just one full-time job for 2010… makes it so simple!

    • Andrea
      That would be nice to have it so you dont owe or dont get a refund – I’ve always tried to do that, but havent been all that great at it.

  3. Thankfully I have a few write-offs because of my business (or should I say my husband’s business.) Most years we break even, meaning we don’t get a tax refund but we don’t owe either. At least you were prepared for owing money this year. Next year may be better! ;)

  4. ICK! I have to do my tax soon. I’m definitely going to owe the IRS quite a bit this year. I have mortgage to write off. I think this year the rental is going to be in the black so I probably have to pay there too. Another thing to write off is the property tax. I’ll try to get blog expense in there this year as well.

  5. Jessica07 says:

    This is the first year I’ve been self-employed full-time, so I’m not to anxious to get my taxes finalized this week, either. I’ll be setting myself up with the estimated quarterly tax when I sit down with the estate’s tax accountant this year. Sigh… I really don’t want to share my earnings this year. :(

  6. My husband has an S-corp now, so we let our CPA friends do all the dirty tax work, but we used to do it ourselves. Having kids in daycare, or just kids in general does wonders for the deductions column.

    Back when I was donating a lot of stuff I used Turbo Tax’s It’s Deductible program to calculate the cost of all of my donations. That has helped a lot in past years.

    Just curious, are you going to adjust your withholding amount, or just plan on saving for taxes again next year?

  7. Bummer! It is definitely more fun to get money back….

    Despite my blogging income (just started making money in 2010–woohoo!), we are actually get a nice sum back. Hurrah! This is due to a tax credit for a new A/C/heater we purchased, blogging write-offs (internet costs, home office, etc.), and paying on mortgage interest.

    P.S. boy will that be a nice day when you have no more student loans! We paid off all of our non-mortgage debt on September 1, 2010–what a day!

  8. I really hate government and taxes. Seems like every time they screw up they have to make small businesses suffer.

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