Taxes Are Done!

While hubby was busy watching the Super Bowl today, I decided to dive into our taxes.  Our taxes are actually pretty basic these days--no rental properties, no businesses, no huge list of itemized deductions--so I figured it would be pretty easy to do.

I took a look at doing the return myself just using the 1040 form on the IRS website but I compared it to last year's submitted 1040 and it looked like there were a few schedules I would need to fill out so I took the easy way out and decided to use an online service...this is where it got a bit complicated.

First, I checked the free file section on the IRS website and it looked like I could file online through H & R Block, a service I had used for the past decade or so.  So I jumped into my account, said I wanted to do the free file thing, and when I got to the end of entering all of the info in (like at the very end of the filing part) it said we didn't qualify to file because of our ages (you had to be between 17 and 50 to use this service!?!). 

I looked at using Taxslayer but it had so many bad reviews I didn't want to risk using that service so back I went to H & R Block which wouldn't let me revert to the paid part :(  The solution?  I deleted my entire H & R Block account, including all of my past years taxes done by them (which I downloaded copies of in case I need them in the future), set up an all new account, entered all of my info once again, and was able to complete the filing, send it off to the IRS, and hopefully within a few weeks, have my refund land in my bank account.  Whew!  I'm glad that's done!

Taxes

I filed my taxes yesterday!  It was really simple as I always use H & R Block online so it is basically fill in the blanks and the program does all of the calculations.  I noticed that the IRS website links to several free tax filing software programs but if you have any sort of unusual income (business income, gambling income, etc) then you will probably be converted over to the not free software (our filing cost $25).  It looked like if you only have W2 income from a regular job or retirement income (pension, social security) and don't itemize deductions the filing will be free.  The standard deduction looks like it increased this year ($12,700 for married filing jointly)...other than that I know very little about tax filing except to stay on top of recording expenses as you go along instead of trying to sort them out at the end of the year.  And one other thing I noticed that was rather annoying was between the screen that figures out your tax return and the screen where you hit submit tax return to the IRS there were several screens of advertising for additional products ('get your refund on an Amazon gift card and get an extra $10!' and crap like that which could be pretty confusing to some people).  I just hit no-no-no through the screens until I could finally submit my return.

What to Do When You Owe Back Taxes

Right after I decided not to watch the election counts yesterday and while I was still reeling from finding out that a friend may end up in federal prison, another friend called because she had a client who needed to file some back taxes.  I still get calls all the time for help with all kinds of things (helping people was what I did in my previous life) so this is nothing new.  I thought that my "things that are going to shock me today" quota had been used up yesterday but apparently it hadn't been because when I asked what forms the person needed, she said "all of them".  For the last six years.  Yikes.
So here is the spiel I gave her about taxes:

• Always file your taxes on time each year even if you can't pay them.  There is a financial penalty for paying your taxes late but there is also a penalty for not filing at all so at least you can avoid one penalty by filing on time.
• If you can't file on time for whatever reason, file for an extension then be sure to file your taxes before the extension expires.
• You can do your own taxes by going to www.irs.gov and pulling up the forms and instruction you need for this past year and for previous years.
• You can also do your taxes online which is even easier because it takes away the need to do all of the calculating.  Just enter your information and it is all figured out for you (I always do my taxes online at H & R Block).  I'm not sure if you can file back taxes through such a website.
• If you are totally overwhelmed, a good tax preparer can be totally worth the money.
• It is sooo much easier when you keep good records.  And this doesn't have to be difficult.  Even a simple Excel spreadsheet where you record expenses and income can be super helpful when it comes time to prepare your taxes.
• So once you have filed your taxes and can't afford to pay what you owe, now what?  After you file, give the IRS a couple of weeks to process your taxes and then give them a call and ask to make payment arrangement.  The IRS does this for millions of people; they want to help you be able to pay your taxes so they are pretty good about making payment arrangements that you can afford.
• If you are completely buried in back taxes owed there is the option to make an offer in compromise or to have the debt totally written off.  I have heard that people have filed for both OICs and write-offs themselves but I would probably recommend having a professional (tax accountant/attorney) do this for you.
• What happens if you don't file or don't pay?  For starters the IRS probably won't forget about you if they have any documentation to show that you have earned money and not paid your taxes (they get the info from your employer who files their own taxes which show that they paid you).  It's a bit more tricky if you are earning money under the table but it isn't impossible for the IRS to figure this out.  Once they calculate how much you owe, they can garnish your wages as well as any other future income you may receive   You can even end up in jail (Al Capone got away with quite a bit of nastiness but he ended up in prison for tax evasion...the IRS doesn't mess around when it comes to getting their money!).

Hopefully the client will get their whole tax mess straightened out.  It can seem pretty overwhelming when one missed tax filing snowballs into a multi-year mess but it is totally worth it to get the mess cleaned up as soon as possible.

Finally My Taxes Are Done!

This is the first year in memory that I was absolutely thrilled to do our taxes.  I used the online H and R Block program which was super easy (even with selling a house and self employment income last year) and super inexpensive ($30).  And, for the first time in memory we actually got money back! 
Within a week or so we are expecting $1700 to be deposited into our bank account complements of Uncle Sam (actually complements of hubby's pension earnings...seems we should change our withholding allowance so we won't be loaning so much money to the government, interest free, throughout the year though).  Before, we (actually I) always owed money in taxes because I have been self employed for over a decade and while I (usually) paid my quarterly taxes, I always came up short and owing at the end of the year.  This year I have very little self employment income and while our income puts us at way below middle class standards, we actually feel "richer" than we have felt in years.  So...our refund this year will be used for earnest money on the house we will make an offer on at the end of this month.  Along with a zero down VA loan, we should--hopefully--be moved into our own house soon!

How I Saved $1200 On My Taxes

In the mad rush to get everything done during the week of our move, I also wanted to get our taxes completed so I wasn’t carrying our tax paperwork all over the country and could leave the papers in our storage shed. I first did our taxes manually which meant downloading the forms, breaking out my calculator, and using a pencil with a good eraser plus taking a couple hours out of my busy schedule. In the past I have usually had my taxes professionally done, especially during complicated years (buying or selling property, cashing out investments, complicated business years, etc). However that costs around $300 and I really didn’t want to spend my travel money on an accountant (not that accountants aren’t great but this past year wasn’t very complicated tax-wise).
In other past years when the tax year was pretty uneventful, I would use prior year tax returns as a template and then enter my current info on a new tax form and do the calculations with a calculator. Needless to say, doing the math took quite a while because it seems like every calculation was made as convoluted as possible!
So last week, I did our taxes using a previous year’s return as a template and was shocked to see that I would owe about $9,500. Ouch! Turns out I wasn’t following my income during the year very well and made much more than I thought and therefore owed much more in taxes than I thought, as well as other small things (like paying less in mortgage interest because we were getting down to about ten years owed on the house and that means more of our money at this point went to principal than interest. Property tax was also lower, and sometime around the beginning of the year, I found a much cheaper house insurance policy so all of these things meant I had less deductions than usual.
While I was still reeling from the huge payment I would get to send to the IRS, I saw a post on a forum about people doing their taxes online. I did a bit of research, found this highly rated site, and learned that you can do your tax return online through a simple process of answering questions. At the end, you know how much you owe/will be receiving back, then you pay a small fee ($24.95 in my case), and you can either e-file or print and mail your return. I figured there was nothing to lose because at the end, if it showed that I owed as much as I had calculated, I would figure I was on the right track and not pay for or use the tax return I had just completed online.
When I got finished, however, there were a few new deductions and credits that I was unaware of which meant that, according to this tax return, I would only owe $8,300! Still a lot, but less than my calculations had shown. So I happily paid for the return to be completed, downloaded the 1040 as well as the other attachments (schedule A, Schedule Cs, etc) and not only finished my taxes in record time (the whole process online took less than an hour and was super easy to complete), but was able to pack up all of my tax records for the year before we left the state.
The bottom line is that if you usually do your own taxes and you aren’t super keen on every single new tax rule change, doing your taxes online can be a cost-effective, and in my case cost-enhancing was to take the drudgery out of tax filing!