Tax Confessions

The tax deadline has passed.  Hope all the procrastinators made it!

I hate taxes.  And math.  To me, taxes are like word problems and my brain just wants to shut down when I get them.

Everything is so overwhelmingly complicated (or maybe my brain just wants to over-complicate things I want to avoid).  No matter how much I read online, I just don’t get it.

I’m 28 and, aside from this year, have only filed taxes maybe twice in my adult life, and I didn’t even have to.  It’s what happens when you only work part-time, minimum wage jobs.

This year, being that I’m required to file taxes as independent contractor, I went to H&R Block for help and to get some questions answered.  $211 later, I left the H&R Block appointment still confused.  The lady just didn’t seem to understand my questions, especially the ones pertaining to my student loans.  She was more interested in deciding what she was having for lunch (hamburger fyi).  But after doing some further research online, I think I figured things out.

Maybe.

No, probably not.

Definitely still confused.

I was told I did not need to file self employment quarterly as most PF bloggers have written about.  The internet tells me I don’t need to pay estimated quarterly taxes until I expect to owe $1000 or more.  Let’s hope that’s the case!

The only thing I took away from my appointment is that my husband and I probably shouldn’t be filing separately.  We currently do so because I do not want my husband’s income to be factored into MY student loan payment.  I don’t want him paying for my loans.

Married couples who file separately lose out on the student loan interest deduction.  She ran a trial based on our numbers from 2013 and we would have gotten back more than double what my husband got back this year from filing separately, including me having to pay my portion of taxes.  There’s still a number of factors to consider before we decide it would be more beneficial to file jointly.  My income was only for three months in 2013, it will be a heck of a lot bigger for 2014 and I will owe more.  I’ll also need to figure out what my payments under Income Based Repayment would be with my husband’s income factored in.  If it increases too much that he’d basically be paying all of it, I doubt it would be worth it.

How did this tax season treat you?  Are you an early bird or an 11th hour occupant?  Do you know what you’re doing when it comes to taxes?

 

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18 thoughts on “Tax Confessions

  1. Quickly posting two things: 1. Your H&R Block rep was absolutely right – you don’t have to pay quarterly taxes until you’ve owed $1000 or more from the previous year. Then it’s required. 2. You can still claim student loan interest deductions up to $2500 if you’re married as long as you make under 75k a year.

      • When you get into quarterly taxes, things get all sorts of confusing. The basic idea is that, if you think you’re going to owe, you’re best to try to pay when you can. You don’t have to pay every quarter either. Uncle Sam just wants his money up front rather than later. And if you overpay, you’ll obviously get back.

  2. Making a quick correction, lol. You can still claim student loan interest deductions up to $2500 if you’re married filing jointly as long as your adjusted gross income together is under $75000 for the year.

  3. Hey Kacey. Sorry about your HRB experience. As someone with lots of experience filing basic taxes (did my own returns from 16-25, then did joint returns with spouse from 26 until 32 and our 2012 tax return), may I give you some of y experience? I always filed my own, because I didn’t think anyone else would be as dogged about getting it right, and even read some of the very backward tax code for one of the state returns we did when the TurboTax interface was screwy. It was exhausting…

    This year we paid someone to do them, because we lived in a state with income tax, sold our primary home, moved to a state without income tax, bought a lot and then started building a home (two different mortgage closings), I worked a primary job and had a side gig as an independent contractor, while my husband is a student, but not full time so I am in charge of paying his student loans and my own.

    With the complexity I asked a CPA friend if we should do one of the box preparers, and was warned strongly against that. We found a local CPA office with IRS certified preparers that essentially did our return. This year with the chaos and state return it was $400, but next year with our info on file and no state return they’ll charge us only about $75. I’m not sure about HRB, but their website pushes the software pretty hard, and talks about the “84 hours of specialized training” folk go through, without making mention of outside credentials (enrolled agent with IRS, etc).

    Given your complex situation and your confusing experience with the lunch lady I’d recommend finding a local office. I’ll bet it’ll be cheaper and you’ll get better answers. If you do a hypothetical and go in a month or so with this year’s data it’ll be their off season and they won’t be swamped either 🙂

    Sorry about the giant text box, I just wanted to let you know it can get better, I promise.

    Also, student loan deductions phase out after 155000 of income when spouses are filing jointly and taking itemized deductions.

    ~Kith

    • Thank you for that information, Kith! I probably should have found a CPA rather than going to H&R Block. Looking at their site now and she is just a tax associate with 5 years of experience, no certificates or anything.

  4. I completely agree with Kith. When I started my business in the summertime it was near impossible to talk to an accountant from HRB. I found a local CPA who works year round. My life was so much easier after that! I could have all my questions and concerns addressed right away instead of waiting days or weeks for a return call. The kicker? I pay significantly LESS for fabulous service and I am supporting a local family instead of a huge corporation.

  5. Good for you Kacey, for dealing with the $$ issue of the week- taxes! I love the way that you have chosen to deal with money, taxes, math, student loan and budget head on, even though it is a huge source of anxiety. Me too. It inspires me to do the same thing, and in fact, reading this post has really got me thinking about employment and how my student loan relates to that. I too, am working as an independent contractor, which has been the source of much tax confusion over the years because of itemizing expenses and keeping balanced books on my own. Some years I was genuinely self employed and had clear business expenses; other years, like now, am only working for someone who does not want to hire f/t employees and pay benefits – so it does not feel like I have any major business deductions to consider, nor have I done any accounting, so will probably just take the standard deduction ( I filed for an extension). There were other years when I had an accountant, and it was so beautiful to have my personal taxes as well as my late parents’ estate taxes all presented to me in an expensive folder complete with depreciation schedules, etc. and filed perfectly for me, for not much more, if any, than you paid for your sketchy H&R Block experience. Consider looking out this year for a good accountant/tax preparer who understands student loans & filing status; there should be people now who are gaining expertise in this area now that IBR is a big thing, and its not as expensive to file personal taxes as one might think.

    One thing that I could use help with is understanding how to maximize my deductions and to organize my life and work so that I can legitimately be claiming business expenses since I have to file as a 1099 independent k’er. When I had an accountant, he didn’t really make suggestions (except to tell me to make retirement contributions, but I didn’t have enough income to follow though) nor did he go through my shoebox of receipts and tell me what was legit and what wasn’t, or give me advice on an ongoing basis, as I had dreamed that having an accountant would do. He did answer specific questions which was wonderful, but as I was trying to get a fledgling business off the ground while buried in s/l debt, I could have used more help. I do know the basics, and have read some about this, but I feel like I need an expert to direct me to do things in ways that I can document things and write them off for tax purposes. Such as getting a separate cell phone for business. I could do that and write it off – far less complicated than trying to claim a certain portion of my personal phone expenses. Wonder if your readers who are self employed have any good advice about who helps them with their tax & accounting issues, other than just preparing the returns, and whether an accountant or bookkeeper would help with that?

    Another thing about tax strategy is IBR. I’m just now realizing how wise it may be to stay independently contracting and/or start up my own business again, be able to claim a lot of legitimate expenses so that my gross income remains very low, and be able to report a low income for IBR even if I begin to make a decent living. This is something you might want to think about as well. Vehicles, supplies and computer equipment,etc, as legitimate business expenses, if you are going to be an independent contractor rather than a W2 employee. You are so good at keeping track of where your income is going, you may turn out to be very good at organizing your life and work so that these expenses become tax deductions. You’ve got me thinking about it!

    • Thinking about this stuff is good, no matter how stressful! I was hoping to claim the laptop I got for work but the lady I saw at HRB said it’s tricky. Hopefully it won’t be so hard!

  6. because of Tom’s business, I no longer prepare my own taxes – k1 is too complicated. I have an accountant doing them for me and all I do all year long is try to keep documentation for her – makes it easier come Feb/Mar when the k1 is done!

  7. I file taxes in 4 countries and sometimes I just want to pull my hair out. Hiring an accountant is not that expensive if your needs are basic and if he makes you think about one tax credit you would have missed, you may even make more than his cost.

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