I’ve been dying for January because I thought I had a decent chance at a real refund this year, for the first time in ages. (Generally I’ve ended up either owing a small amount, or getting a small refund.) As of yesterday I finally had enough documents in that I could start working on them, and even though I’m not totally done yet, because I’m still waiting for one official W2 and one official 1099 to make an appearance, I think, based on my preliminary calculations, that I was right and I should be able to put a healthy chunk of cash towards my Roth IRA. [Can I take one second to be mildly depressed about this, though, because I’d rather blow it on some new clothes. OK, better now.]
Except for two years when I was a self-employed freelancer (one year I swear I had seven W2s, plus assorted income that I had to report myself because nobody had bothered to either withhold taxes or send me a form) and hired an accountant, I’ve always done my own taxes and never used a computer program. My dad got me started with pen and paper when I turned 18; it’s free, and, again aside from those two years, it’s not like my financial life has been all that complex. There was one year when I made a mistake entering something and got a $700+ bill from the IRS a few months later (cue total freakout) but I filed an amended return with the correct amount and that was that. No other horror stories.
This year is a bit more complicated than most because I changed primary jobs and states mid-year, but I was able to find a free e-file program through irs.gov that will file both of my state returns and my federal return, including the Schedule C for my side hustle and the moving expenses form. It’s kind of soothing to just answer their questions instead of filling out everything myself and cross-referencing against all the instructions! I see why people like e-filing so much 🙂 I don’t regret not having paid for a program or whatever all these years, but it’s nice now that it’s free.
Anyway, so far it’s been a fairly smooth experience. I did set myself up well for it by doing a few things right during 2014:
1) I kept a spreadsheet of side hustle income. Unfortunately, I can’t really claim business deductions since I don’t have dedicated equipment or space, but on the upside, this does make the taxes more straightforward since all I had to do was add up what I made and enter it, instead of wrestling receipts and whatnot.
2) The side hustle spreadsheet also helped me remember all my non-W2 income for the year. Last year, I forgot until after I filed that I had a small amount of royalty income and also forgot that I’d sold some stock and needed to report capital gains; it was all such a small amount of money that I considered not doing anything about it, but better safe than sorry so I ended up spending an entire day filing an amended return. Blah. This year, I not only remembered that I had the royalty income, but also knew exactly how much it was even though I haven’t received the 1099 for it yet, so I could make my preliminary estimate much more solid.
3) I kept my receipts from my cross-country move. This is really “helpful” since the move cost more than I made in side hustle income; on the one hand, it sucks that I had to lay out the moving money, but on the other hand, at this exact moment it’s nice to reduce my tax obligation. As a single childless non-homeowner I basically never benefit from tax deductions so I was pleased for once to get something off.
4) Speaking of the move, obviously I have to file two part-year returns, one for each state I lived in. This is where the tax software (and my spreadsheet) have really come into their own. The software alerted me to some stuff I might not have figured out on my own — like, I can deduct those moving expenses from my income in the state that I moved into! Cool! (I guess this makes sense; I incurred the expenses while I was in my old state, but my new state is the one where I get to deduct them because my new state is benefiting by having me, whereas my old state lost out on a revenue source.) Also, filing two state returns is just a pain no matter how you slice it, so it’s nice to have the computer doing a lot of the grunt work for me. My spreadsheet, meanwhile, was helpful again because I broke the income down by month, so I could tell which part of the self-employed income had to be claimed in each state without having to do much work at all.
5) I managed to remember that I had interest income even though my bank doesn’t seem to be giving me a form for it, AGAIN because of my spreadsheet. Whatever, I reported it, form or no form.
I’m sure I’ll talk about it again when I’m done, done, but so far this has been pretty good. It’s interesting to me how much better I feel getting something back, even though the primary reason I’m getting a refund is actually the mid-year pay cut I took because of the new job. Obviously mathematically it would have been better overall to have a much higher-paying job all year and either break even or owe a little at tax time, but in terms of my feelings, I am going to like getting that direct deposit!