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!