Tax Time

2014 taxesI’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 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!

39 thoughts on “Tax Time

  1. I understand why you would be “mildly depressed” about putting your tax returns into savings instead of buying new clothes : ) Did you find you were more excited about paying off debt than you are now about saving? What did you get royalty income from?

    1. thesingledollar says:

      Yeah, you know, I was a little more excited about paying off debt. Each payment felt huge; I think part of my excitement problem is that I’m saving for different things so there aren’t the huge impacts I had when I was putting $2500 towards a loan. However! I am motivated enough to keep saving, for sure. I’m not going to start blowing all my spare cash now that I have to blog about it every month! Royalty income — it’s from a book I worked on almost a decade ago. Every year I get a check for $50-$100 or so. Not going to get me to retirement on its own, that’s for sure 🙂

  2. I’m like you – a few years ago my tax return would’ve been spent. This year, it’ll go straight to the bank! But I’m happy about it. 🙂

    1. thesingledollar says:

      What’s not to like, after all 🙂 On further consideration I think I am going to keep a little out for fun money; then I’ll be glad to save the rest of it.

  3. This year Canada has the new Family Tax Cut, so we’re expecting a bigger than usual refund. So that’s exciting! But, we won’t get to “spend” it either.

    Being organized makes doing your taxes so much easier, nice work!

    I’ve always done my taxes by efile. There’s been free programs up here for a while and I like not worrying that I forgot to carry a one somewhere.

    1. thesingledollar says:

      I think we’ve had free programs for a while too; I’m just set in my ways 🙂 Yay for a bigger refund — and glad you have good things to do with it 🙂

  4. Cindy says:

    I spent many, many years owing every year at tax time, so like you, I’m super excited now when tax time comes around. It will all be going to my student loan, but it’s still good progress!

    As much as mortgage interest is hyped, a lot of people don’t actually get any type of deduction for it. You have to have enough deductions to itemize, otherwise you just get the standard deduction. I’ve owned 2 different places, and have never gotten a mortgage deduction. I was better off being a renter, as my state does a renters deduction!

    1. thesingledollar says:

      You know, you just made me feel better about my non-homeowner status! 🙂 I know we’re not supposed to be excited about refunds and mathematically I know that’s right, and yet I am in fact psyched. Human emotions do not always conform to logic!

      1. Cindy says:

        I’ve gotten over the PF “No tax refunds!” mantra. There can be such a thin line between owing and getting something back some years. Plus, it’s probably only a $20/week or so difference for me on my paycheck. I’m not really loosing much in interest on that amount. Better to get it in bulk, and make sure it goes where I want, then worrying about small amounts weekly slipping away!

        1. thesingledollar says:

          Good, I’ll quote you on that if anyone hassles me about my enjoyment of this refund! 🙂

  5. Alicia says:

    I *LOVED* tax time last year because I received a HUGE tax refund due to tuition credits, moving, and the province having a “graduate retention program” for the 6 years after you graduated.

    This year,… not so much. I have minimal tuition credits, I didn’t move for work/school in 2014, and the province nixed the grad retention program. Plus, my income is about $20k higher than it was last year (Woo!!!) but not all of that had taxes withheld properly. Basically, you already know this, but I owe the CRA a decent chunk of change. So tax time is not a fun money time for me this year. 🙁

    1. thesingledollar says:

      Yeah, I was actually thinking about you as I wrote this post 🙁 I’m sorry this is a rotten tax year for you — the years when I’ve owed a lot haven’t been much fun, for sure.

  6. I’m not looking forward to doing my taxes this year. Thankfully, I kept track of everything on my spreadsheets.

    1. thesingledollar says:

      The years I freelanced were really complicated! I used an accountant that some of my theater friends recommended. So many receipts — although it was nice getting to write off theater tickets and my netflix subscription and so on.

  7. Elroy says:

    Ugh. We owe money. About $2k, but I had an error at the start of the month showing $8-$9k! I was not happy about that. I’ve got my 90% answer, just waiting on a few things to come in so we can cross our “t’s” and dot our lower case “j’s.”

    I can empathize with you on the part year year returns. I’ve had to do them 4 out of the last 7 years, and one year I had 3 states! It was a bit of a mess, which eventually triggered an audit.

    1. thesingledollar says:

      Ugh, I hope I don’t get audited! I do my best to keep things clean — I even filed that amended return last year over $150 of extra income that turned up — so hopefully everything will be ok, but it just sounds like a pain. Hopefully I never have to go the three-state route. Sorry that you owe, but I’m glad it’s $2K and not $8K!

  8. Michelle says:

    I am insanely impressed you do your own taxes via old school style. I do mine as well (though I may take it to an accountant since I’ve been freelancing this year), but I do it through online only. I sometimes go in for the free “double check” some places offer, but I often find that I can figure it out myself without much hassle.

    But again, I bow to your tax awesomeness.

    1. thesingledollar says:

      LOL! Well, having finally done the online thing this year I may never go back. It wasn’t really that impressive — I was just pretty set in my ways. And for years I didn’t quite trust the e-file system. Paper just seemed safer, somehow. I am 100% sure my dad will keep doing it on paper until he dies, so I guess I inherited some of his stick in the mud-ness 🙂

    2. thesingledollar says:

      P.S. the accountant is totally worth it for freelancers. You really want someone who knows what they’re doing and can double check that you’re not taking illicit deductions.

  9. I’m super impressed with your organized plan of attack! That’s awesome. We once had income from three different states in a single year, which made for an interesting experience :). Good luck (though I don’t think you’ll need it)!
    P.S. It’s so cool that you have royalties.

    1. thesingledollar says:

      My royalties don’t get me very far, alas, but yes, I enjoy having them just for the coolness factor 🙂 Multiple state returns is a *huge* pain, so I hope my life settles down soonish. The e-filing service is really helping though; I feel more confident that all the relevant forms will in fact get filled out.

  10. I hope you get something back! I’m a freelancer and could not imagine doing taxes myself. The prep work alone would drive anyone crazy! I still have not gotten one 1099 yet from my clients. Looks like I need to send a bounty hunter out soon. Grrr! 🙂

    1. thesingledollar says:

      Yeah, the years I freelanced would have been nearly impossible without a professional. I was glad to turn my giant stack of receipts over! Good luck tracking your clients down.

  11. I’ve never done my own taxes bc my aunt used to do them for me. This year, with freelance, buying a house, and deductions, I don’t even want to try it out and will be going to an accountant. Not having deductions because you have no dedicated space is the first I’ve heard about not being able to use deductions as a freelancer. I deducted internet, computer, etc from last year’s income.

    1. thesingledollar says:

      Well, I think it depends on whether or not you’re a full-time freelancer. My computer/internet are 95% personal use. If I were full time I’d definitely deduct that stuff. However! I don’t really know — I played it safe because my freelance income is pretty small and I didn’t want to bother talking to an accountant. You definitely should — there’s a ton of stuff in your life this year and you need a professional for sure.

  12. I’ve been dreading tax season more and more every year as I’ve been owing more and more. At least it’s a byproduct of earning more, but still. I doubt I’ve done enough this past year to lower it considerably.

    Props on doing it old-school. That ship sailed for me last year when I got lazy, which might remove my PF blogger credentials.

    1. thesingledollar says:

      Yeah, now that I’ve gone e-file I may never go back! And there’s just something depressing about owing, isn’t there? Even if it’s because you earned more. I guess I should start a savings account and put some of my side hustle money in there so that I’m a little more prepared.

  13. Brooke says:

    Ugh, taxes. It shouldn’t be that difficult for us – just normal jobs. But we are in the process of filing business paperwork and it is halfway done — Not sure what I need to do there. I think I need to go ask the Small Business Administration & I should be done, but what a pain! Especially since I am still in the negative for my PTO balance and cannot take any time off. Only 6 more weeks until I officially can take a day of vacation!

    1. thesingledollar says:

      Oh man, I would definitely consult someone if I had business paperwork. And oh man, that’s rough about the time off! I’ll root for six weeks to be over fast. 🙂

  14. I can’t wait to do our taxes! I think I will get a return, but I really just want to put it behind me. We owed quite a bit once and I have never gotten over it. Tax time just makes me anxious!

    1. thesingledollar says:

      I’m with you there — whether I get something back or not I just want to know! I’ve owed a substantial amount once or twice and even though it sucks, I think it’s better to have a sense of what you’re dealing with in January rather than in April. Sorry about the anxiety, but I hope it’s over soon!

  15. I wish I had some kind of indication every year whether or not tax time would be a good or bad thing for me. Every year for the past few years it’s been a complete surprise as to whether we would be happy or not, because of this, we typically wait until late March to even start thinking about taxes.

    1. thesingledollar says:

      Yeah, my income’s bounced around so much over the years that I have very little regularity! I have the opposite reaction to you — I want to get them done ASAP so I know what I’m looking at. But if I owe money I typically wait to file until pretty late so that I have time to assemble whatever cash I need. Anyway, sympathy on the uncertainty! It’s frustrating to have no clue what you’re looking at.

  16. Kristin says:

    Yay for you for being super organized last year! I was audited for 2011 & 2012 (cue major panic attack), had filed an extension for 2013 (moving across the country, changing jobs, tuition & student loans, various 1099’s, etc.) and haven’t even thought about 2014. Luckily both states I lived in don’t have state tax- woohoo! I meet with my accountant tomorrow and have a feeling I will be a sad panda after paying him.

    1. thesingledollar says:

      Oh my lord, two audits in a row?!?! Do you know what made them suspicious? That’s a nightmare. Good luck dealing with 2014 and your accountant, though.

      1. Kristin says:

        It was actually something from my day job at the time – my boss was a little sketchy and got audited, which I think lead to me getting audited because he did some false reporting. Talk about heart attack!

        1. thesingledollar says:

          Oh lord! Sketchy bosses are the worst. I definitely had some when I was a freelancer but I guess I got lucky. Sorry you had to go through that!

  17. Debt Hater says:

    I’ve always received a decent refund because throughout school and before I either got all my taxes back (didn’t make enough). And right now I take the full student loan interest deduction which gives me quite a decent amount back by itself. It’s actually better to get all your money during the year though! Even if psychologically it feels nicer to get a big “extra” deposit into your bank account.

    I think point #1 that you made is really important though, my accounting professor told us how he saw lots of people thought they could completely deduct their internet bill, electric bill, new computers, etc. You are only able to deduct a small portion of that – only the part that is the business expense!

    1. thesingledollar says:

      Yeah, when you make a little as most students do you generally do get a refund! And I think lots of freelancers screw up by taking too many deductions. IMO freelancers almost always ought to consult an accountant or else play it super super safe.

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