Monday, April 21, 2008


So we finally buckled down and did our taxes. (Last weekend, the post is late, not the filing.) When I say we "did" our taxes, I use the term pretty loosely. Since my husband has his own business, it can get a little complicated, so we have an accountant. The accountant sends us a tax planner, which is a 10 page document with tax-related questions. All we have to do is fill it out, attach any related documents, sign and send it back. Not quite as involved as actually "doing" our taxes ourselves.

Last year when we filed our taxes on April 14, we told the accountant that we would be much better this year. Not wait until the last minute. Send them in early, with plenty of time to spare.

Yeah, right.

I finished our planner on Sunday. April 13. Beat last year's record! Except Sunday is not a business day. Undeterred, I drove the packet to the accountant anyway. At 5:30pm. Not surprisingly, the door was locked and no one came when I knocked and yelled. This was not good. I drove 45 minutes and spent $50 in gas to bring this packet in! I was going to submit it! So I dialed the phone number on the business card and, one by one, punched in the names of each of the 4 partners. And got 3 voice mails. In a movie-esque climatic scene, the fourth and final partner was there, in his office, and came downstairs to accept my packet. No dirty looks or anything! I was shocked.

The next day I got the phone call from our accountant. I was expecting to hear from her as there are always a few things to go over. What I was not expecting was the amount due. Almost $3500. In federal taxes alone. I just about fainted right there in my cube at work.

With complete lack of foresight and the unforgivable ignorance of taxation, I had assumed that our taxes would be about the same as the prior year. It was not. Last year we owed about $1000 total, between state and federal taxes. This year the total between the two was almost $4000. Thinking back, it's obvious that this would happen. Our income almost doubled from 2006 to 2007. That alone accounts for much of the difference. The main issue here, though, is that we failed to plan ahead.

That's right, we didn't have the money to pay the taxes.

When I heard the total from the accountant, I panicked. Last year was the first year I've paid taxes instead of getting a refund, so I'm inexperienced. I was freaked out that if we didn't pay in full by April 15, we would get audited and penalized beyond belief. The accountant reassured me that it's not that bad, and to pay what we could immediately and they will bill us for the rest. So I wrote a check for $500 to the IRS, and another check for the entire state tax and now we wait. Wait for the next round of paychecks and for the bill to show up in my mailbox. Hopefully the two will coincide and I will be able to kick this swiftly.

In the meantime, though, I'm going to change my exemptions. :)


Sharon said...

That is definitely a bummer. We owed $1245 on federal this year but we received $1100 from state. We "lucked" out. With my husbands large bonus this year, we both lowered our exemptions. I don't want to get stuck next year...
I didn't know you didn't have to pay the whole amount upfront? Do you have to pay interest on the payback?

JvW said...

Glad it worked out for you! I am still learning about the payback (spent quite a bit of time on today). As far as I understand, there is a penalty (amount unknown) and 0.5% interest on the unpaid balance.