Tax Time

It happens every single year. January first comes around, and I start stressing over taxes. Will I get money back, or wind up owing money? How much will I owe, and how can I ever pretend to be able to afford it? What if I screw something up and don't file it correctly, then wind up owing the government even more?

If I haven't gotten my tx paperwork by January 7th, I start to panic. "Where's my W2? Where's my 1099? How can I file my taxes without these? Should I wait for them, or just go in with my records? I need these papers, and I need them NOW!" Of course, since nobody has these papers out to their contractors and employees that fast, I start panicking very early.

And of course, I'm also on the receiving end of all of the questions too. Last year, was horrible. LW didn't even have the paperwork out until mid February, so we didn't get it until mid March. (Little known fact, while the companies are supposed to have them out by the last day of January, they actually have until February 15th to get them out and not be penalized for them being late.) Of course, each day last year that we asked about them, we were told "We just sent them out. They should be arriving soon!" What they actually meant to say was "We just thought about sending them out. We'll get around to it. We promise!"

So here I was last year saying "they're on the way" when they really weren't. I tried to avoid that issue this year by taking the 'wait and see' approach. I avoided all questions as to where 1099's were because I was trying to avoid the great lies from last year. (Fibs, mistruths? Lie makes it sound intentional and I don't think it was.) Either way, I didn't want to say "they're coming, I promise" if I didn't know that they were. On the flip side, I also didn't want to scare people by saying "I don't know when they'll be here."

Anyway... my own 1099 finally arrived yesterday. Even though LW has the correct information on file, and sent the 1099 to the correct address last year, this year they sent it to an old residence. It took a while finding me.

We gathered up all of our tax information, other W2's, receipts, documents, etc, and went to HR Block. We handed it all to our preparer, and I sat there and stressed while she did our taxes for us. She'd ask me questions about my work, and I'd answer them. Then my poor husband would decide he knew my work better than I did, and would re-explain my answer in terms he could understand. So yeah. I bit his head off once or twice. The preparer said we reminded her of her sister and brother in law, and in the back of my mind, I thought, "man, I sure hope they aren't getting a divorce!"

We walked away with much less of a return than usual. It seems we're in a slightly different tax bracket now, (thank you other job!) and so we get back less. The preparer explained the differences in our tax payments, and then she said something that really bugged me. She told us that a lot of independent contractors and businesses will buy a bunch of equipment (or services) at the end of the year, just to write it off and take their taxable income to zero, or less than zero. This way, they don't pay taxes.

This irritated me greatly. I have no problem paying my taxes. In fact, by the end of this year, we expect to be in yet another bracket, again thanks to my other employment position, and expect to be owing taxes. (I'll be changing my W2s so that I'll get paid less through the year, but we'll get a huge chunk back at the end.) I don't have a problem paying these taxes at all.

These taxes pay for things like Medicaid, Social Security, Food Stamp and Welfare programs. They pay to help fund our children's educations, give them proper nutrition at school, after school and summer programs, childcare for those needing it, road repairs, etc.

Now a lot of people sit there and say "It's not fair for US to have to pay for something we won't use! These people that would use it just need to quit being lazy and WORK for a living! They need to take care of themselves instead of living on MY dime!"

I get that sentiment. I have used just about every single one of those services in my past. I had Section 8, subsidized child care, food stamps, medicaid, student meals, even a gas allowance when I worked up in Austin. It is because of thse programs that I am now getting ready to enter into another tax bracket over here. Yes, there are many that never are able to fight their way out, but it isn't necessarily because they are lazy. Sometimes, circumstances are just what they are.

Even if I had never used these things myself, even if I had grown up and into a middle class bracket, I would still support paying the taxes for others who were less fortunate. The reason is quite simple. I am able to recognize that my children, or their children, or even their children, may wind up depending on the system for their mere survival. They may need the things I needed back then. And if my kids, grandkids, or great grandchildren need it, then I want it to be there for them.

Eh... it is what it is.

Anyway, for the IC's, always keep careful records of all of your payments and expenditures. Remember, any fees you pay out to others, you can claim. You can also claim your equipment, business phone expenses, and Internet expenses. If you have a home office area, you can claim a portion of your electricity as well. Keep approximately 1/3 of your income to the side so that you can use that to pay your taxes with.

For employees, if you find you're in the bracket of "next year, I'll be paying taxes instead of being owed..." then you'll want to change your W2's. Make sure you mark less dependents than what you actually have on your W2's, and have the greatest amount with held from your checks. Yes, it will be less money during the year, but at the end of the year, you'll get a nice big chunk back. This way, you already know all of your taxes are paid and don't have to worry about what you may owe. If you work at home, you can claim your work at home expenses as well.

I do advise IC's to go to an actual tax preparer. We use HR Block for their piece of mind guarantee. Basically, we pay $35 for an insurance type guarantee that says if something wasn't done correctly and the IRS wants more money from us, they'll pay it out of their own pockets. They will also work directly with the IRS on our behalf to come to a quick resolution. It's kind of like home owner's insurance. The chances you'll ever need it are extremely slim, but if you do need it and don't have it, you're kinda screwed!

My rambling for the day is done I think. While I won't be buying that decent used minivan we had our eyes on, we do see a new washing machine and perhaps a riding lawn mower in our future!