1.28.2010

I have a testimony of the emergency fund.

I just completed the tax-form-filling-out process through good ol' Turbotax. I have not hit "submit," however, because I'm waiting for a few last statements to arrive and also because I'm in a coma in the hospital after seeing how much I'm about to owe the government. It's a lot. Like, over $1,500 a lot.

I suspect the culprit is partially my paycheck (maybe I put down 1 exemption instead of 0?) but I also know I'm not the only person in this boat. Turbotax knew it too, because right after I screamed and passed out (knocking myself on the head in the process and coming up with the idea for a time travel device shaped like an IUD) I saw a little link on the screen that said something like "Did you just scream and pass out? Please click here." Turbotax went on to explain that for some tax payers, the discomfort they may be feeling right now is brought to us by the letters E-C-O-N-O-M-I-C S-T-I-M-U-L . . . anyway, you get where I'm going with this.

I know that it's ideal to work out your W-4s so that you break even each year. Because you don't want to owe money, nor do you want to give the government an interest-free loan. Since we see how great they are at money management. So I was just hoping to break even. And in the event that we had received a big refund, I would have gone in and adjusted our W-4s accordingly. And then fielded GH's pleas for a new television. (Looks like I'll be doing some W-4 adjusting anyway now, though. Go me!)

It does stink to discover that we will need to pay a big chunk of taxes right now. But last year, you'll remember, my goal was to get an emergency fund going. We did it, and now that's where this tax money is going to come from. And then I'll work on putting that money back the fund. Because of the emergency fund, this unexpected ginormous bill is not putting me into a panic. Other than being an annoyance (and a dasher of GH's tender television-related dreams), it isn't actually going to change my life all that much.

I chatted with a lady at work, though, who had the same thing happen to her. Usually she and her husband receive a significant refund. This year, like me, they owe money. Only, see, my friend is used to getting the refund--she was actually depending on it. They had planned a long-overdue family vacation, one involving their out-of-state children as well. Now, the trip will have to be canceled. Not only that, but they are scrambling to figure out where this tax money is going to come from. Maybe they'll have to put it on a credit card, and then they'll have the interest to deal with. This situation is causing their family disappointment, stress, and financial strain.

I feel terrible for my coworker. And even though I know that for many of us now is not the easiest time to be trying to put money aside, this has shown me that it's very much worth the sacrifice.

21 comments:

Kim said... [reply]

Oh my, the same exact thing happened to me! I was so excited watching our refund number go up, up, up only find out that since we rented out our home we know owe them the $7500 that they gave us for buying it! Not cool, really not cool. Unfortunately we don't have a emergency fund - luckily the summer months save our bacon when it comes to money. Stimulus my ass...

Nemesis said... [reply]

Holy crap, Kim! $7,500??? Yeah, it would have to be some monster emergency fund to cover something like that. Dang . . .

goddessdivine said... [reply]

You've already done your taxes? I've bought the software, but it sits on the kitchen table....

Yeah. Unfortunately there will be many who are going to scream and pass out at the computer, as they will have to pay back the "tax cut" they received throughout the year. This is something Uncle Sam did not tell everyone while he was giving "stimulus" money away.

One year I owed $4500 between fed and state. And then I got to pay a tax (read: fee for owing so much and not letting the govt keep it in the first place) on top of that. After my heart palpitations and panic attack, I nearly had an aneurysm.

LOVE tax season!

emandtrev said... [reply]

I feel your pain. We owed several thousand a couple years back and I went berserk. No really. I ranted and shouted and cried to the point my dear hubby was truly worried. Keep in mind that this was right after my hubby finished his higher education and we were trying to do everything right with our finances, including building our emergency fund. It turned out to be one of those dear "learning experiences" for us wherein I probably blacked out after seeing red. Awful.

Audrey said... [reply]

This year I've decided that it's really important for me to start an emergency fund, and this story reminds me why! Owing money for taxes is no fun.

My word verification today? Whinge. I thought that was appropriate.

TOWR said... [reply]

I've been trying to get six months' worth of living expenses saved up. I used to actually have it, but then I got spendy. Will I ever learn? Anyway, I've set aside a whole crudload of money for taxes (the majority of what's in my bank account is actually for taxes), but I'm still scared I'll owe more. **whimper**

My word verification is "panzed." I think they mean pantsed--as in, I'm caught with my pants around my ankles.

Tess said... [reply]

First time commenter here . . . I just couldn't resist any longer! When you get the time travel device, let me know! I love reading your blog and will definitely be one of those admirers (read crazy stalkers) if I ever see you in real life. Thanks for making me laugh while simultaneously making me so scared to start working through our taxes. Yikes.

Spitfire said... [reply]

Well what happened in your coworkers situation within the past year to make them owe a ton instead of get back a ton? I don't get how those things can change so quickly without people having some sort of idea. Shouldn't we get some sort of memo in the mail ahead of time or something? :) Freeks me out.

lilcis said... [reply]

As my dad said to me a few years ago . . .welcome to being a DINK! As in Dual-Income-No-Kids. Yeah, it sucks. I'm really really hoping that with buying our house this year we might get a small refund (or at least break even) from all the escrow deductions & interest we've paid so far. Our emergency fund was actually a house-deposit fund, and it really hurt to see that go to taxes every year instead.

Oh, and you may want to consider doing your taxes yourself, by hand, instead of on the Turbo tax. I've done it both ways before and ended up coming out better on my own prep because there were some deductions the Turbo Tax didn't even ask me about that I was eligible for. It takes a lot more work and a lot of reading the instruction booklet, but it could be worth it. And I swear I didn't do any squirrely accounting that I could get dinged for if I was audited.

Nemesis said... [reply]

Spitfire, a lot of people have received tax breaks this year (as part of the Economic Stimulus Plan) which resulted in less money being taken out of their paychecks. It was just something that was happening whether or not people asked for it or were aware of it. Except then come April 15th the government kind of wants that money back. Please don't ask me how getting slammed all at once is supposed to help anybody.

Giggles said... [reply]

The small (okay, maybe not so small this morning) evil part of my brain is cackling that this post comes the day after the State of the Union address.

We're getting ready to start our taxes this week. Any refund we get will be to pay down our house faster. We're still not sure yet what getting married is going to do to our refunds though.

Science Teacher Mommy said... [reply]

You could just have a baby. :)

Tis the time of year I love the interest on my house payment and my three little men the most. Kidding, I'm kidding. I like them when they give me presents at Mother's Day too.

AmyJane said... [reply]

All good reasons to have a kid or two in 2010! This happened to us too when we were newly married. I had never before owed taxes and there was a LOT of screaming and also crying. Ever since then, we've probably erred on the side of giving the feds a loan but still....it's just too scary at this stage of life to think of coming up with huge sums of cash and depleting whatever emergency fundage we have. Cause, um, yeah, nobody I know has $7500 in emergancy fund cash.
Anyway, yeah. The kids are the real safegaurd in the tax situation. Get on that.

Desmama said... [reply]

Yeah, get on that, Nem. (You know I'm kidding, right?)

Desmama said... [reply]

Also, yeah, we got that surprise last year, I think it was, and I was ready to strangle our accountant (but really, it wasn't her fault, but I was like, wait a second, we owe how much?). So not happy about that.

norteamericoyajr said... [reply]

We always overpay The Man to make sure we don't owe at the end of the year. Yes, it's an interest free loan to The Government, but really... I'm missing out on $18 of interest (assuming I'm disciplined enough to save it). For me, $18 is a small price to pay for: 1.) peace of mind that I won't have to come up with cash at tax time, and 2.) a small bonus around the time Christmas bills come due.

Missy W. said... [reply]

i also need to adjust my witholding amount. We have ended up owing taxes the past two years now. I always got money back when I was a student. Doesn't it suck to have a real job? I've heard one nice way to fix that is to have a kid...but the cost to do that isn't offset by the child tax credit...and don't get me started on health insurance...groan.

april said... [reply]

i have too many children to worry about this. it will be a sad day when all my little tax deductions leave the nest and we actually have to pay. as i hope to be full-fledged homeowner by then as well (i.e. mortgage paid off), i'm sure my taxes will be astronomical.

daltongirl said... [reply]

I have a testimony of putting a metal roof on my house. Also of having a full-time missionary son. Because those two things saved our bacon, my friend. Our refund is not large, but we don't have to pay, which was making me sweat bullets. Because I don't want to use my emergency fund on taxes, that's what. I should probably take you to lunch with my refund. We could go to Wendy's and get something off the dollar menu.

East of Eden said... [reply]

you can also ask the IRS to set up a payment plan for you if you owe them money. I did one year. I would also suggest, if you haven't don't it already, try to itemize your return. We do that with our tithing and it always saves our cake. Good luck and hope the damage is not too bad.

Sherry said... [reply]

We just found out we owe like $300. So lame. Fortunately it isn't more.

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