I finally got around to doing our taxes last night. I've always done our taxes--even when DH was doing a lot of contract work and we were taking a home office deduction. And we have only owed taxes once--even though each year we increased our withholdings to avoid a refund.
I knew going in that this year would be different. For starters, our income doubled--so I was pretty sure that we were going to jump into a new tax bracket. And I was contract for the first 2.5 months of the year-so I knew we would owe for that plus the amounts DH earned for contract work (he usually builds a couple of websites a year for small businesses.)
But I was not prepared to owe $12K.
Apparently our new income means losing the child tax credit, and any deduction for student loan interest (which is capped at $2500 anyway, I paid more than 4x that!) That is what is killing me--the only reason that I have a high income is because I have student loans out the wazoo!
And our mortgage interest and deductions for taxes barely made a dent in the amount owed. Apparently the government wants me to quit paying on my student loans and buy a much larger house if I want to reduce my taxes.
Anyway, I hope that I have screwed something up. For the first time ever, I am paying someone to do my taxes. I hope that they can at least find enough additional deductions to pay for themselves! And that they can tell me what I need to do next year to avoid a repeat scenario.
7 comments:
If I could leave a written form of a b-horror-movie scream, I would do it right here. The IRS scares the pants off me, and the student loan companies are run by satan. Hope that helps.
I am so sorry. I hope you find out that it isn't the case!
Last tax year (2007) was like that for us - we owed $4700 that we did NOT have lying around in savings. My year-end bonus ended up paying for the last year's taxes...and how screwed up is that? Income I paid tax on already was going to pay income tax?
Sigh.
I want to start throwing out stuff about Democrats vs. Republicans, but guess what? I've already used the delete key on that point! Yay! Basically, getting socked with a huge bill that you weren't ready for SUCKS. Good luck. Hang in there. You're not alone.
LOL, newduck.
Shelley-I remember your post about that--yuck!
Thanks for the sympathy gudnuff.
OMG!! We owed like $400 this year (we got married and that really screws with your tax situation in a bad, bad way) and I was freaking out!!
Note to self: never get a real job.
This happened to me. We also used an accountant. Welcome to the upper tax bracket. I'm guessing there won't be much you can do (though let me know if your accountant comes up w/ some stroke of genius)to reduce your tax bill, but going forward, you should definitely adjust your withholding to the lowest of 1 if you haven't done so already, and you want to make sure that you prepay your taxes next January to 110% of what you are paying this year to avoid penalties.
Thanks Kady--you definitely have a better grasp of economics than I do. I think you are right that there isn't much we can do--the problem is with our withholding. I thought that we had reduced DH's when I started working full time, but apparently not. So, we will drop him down to 0+ extra to make up for the first quarter of this year.
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