Every year, I dread doing our taxes. For a number of reasons, this year I wasn’t able to submit all of our paperwork until the day before they were due. I was stressed to the max and I knew that we’d owe (probably more than we have in previous years). I was right.
Filing Taxes This Year
The biggest difference with filing our taxes this year is that my husband had a notable income. In previous years, he was either out of work or working a low-paying mechanic job ($250-$400 per week). Then he got into freelancing, but that doesn’t always bring in reliable income either. So, for the most part, we lived on what I made.
About a year ago, he was hired on by a multi-national company to write content for car manufacturers like GM, Buick, Ford, Chevy, etc. He’s been doing a fantastic job and it made our finances way easier to manage. We haven’t felt the crunch of living paycheck to paycheck as we did before. However, the increased income had a significant impact on where we landed in the tax brackets.
I work on a 1099 and taxes aren’t taken out. He’s a W2 employee and has taxes taken out, plus all of our health insurance costs. Despite this, we wound up owing about $15K this year in taxes (state and federal combined). We have a portion of this and can make a partial payment, but we will need to set up a payment plan with the IRS to pay off the rest. Thankfully, that’s an option for us.
But what a nightmare! I was expecting to owe, but certainly not this much. My annual earnings actually went down last year, but our household income increased and tax laws changed.
So, now our number one goal is to find a way to start paying this off – and fast. No one wants to be in debt with the IRS – it’s nerve wracking.
Our Plans Moving Forward
We are going to do a few things to get this off our plate quicker and ensure it doesn’t happen again. First, we are going to take an aggressive approach to paying it off. We plan to pay about $500/month towards the debt with the IRS. That’s simply what we can afford right now after clearing out what we had set aside for taxes already ($5,000).
For next year, we plan to try and set aside more money to have for when we file. We are also planning on hiring someone next year so that it’s not so stressful on me (I was in tears doing taxes on Monday). Having a certified professional do them may also help us find additional deductions that we aren’t currently claiming.
Have any of you experienced being in debt with the IRS? I’d love to hear about your experiences and how you got through it.
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