Happy Tax Day, friends!
Taxes around here have never been fun. Since hubs is self-employed (and until last summer I was working contracted jobs where taxes weren’t withdrawn from paychecks), taxes are always a bit….dicey.
To be fair, we DO make estimated quarterly tax payments. We also make strategic donations that will allow us to take advantage of Arizona’s tax credit (to cover any state income tax liability).
And immediately as soon as I began working full time (started in July 2015), I began deducting HUGE amounts of my paycheck. Like, my net pay is literally half of my gross pay.
I try to take out as much as possible pre-tax:
- Retirement contributions to our 401(k) (<note, I feel like I call it something different every time I mention it. I looked it up and the mandatory 7% is technically invested into a 401(a). On top of that, I invest another 3% in 403(b) through work. From this point forward, I’ll just refer to this as 401(k) contributions for simplicity’s sake). The mandatory 7% + extra 3% means 10% of my pay is gone right off the top.
- Medical and dental insurance.
- Medical savings into a flexible spending account (pre-tax money to be used only for medical purposes, which also includes covering dental work).
- Childcare savings into a flexible spending account (again, pre-tax money that can only be used for childcare purposes).
- Parking permit. I have to pay for a faculty parking permit, which is auto-deducted from my paycheck. I double-checked and, yes, even this is listed as being deducted pre-tax.
But even with all this stuff to help offset the tax burden…we still usually end up owing money (ahem….technically prior to the job all we did was the estimated quarterly taxes + Arizona tax credit program. But you get the idea).
Last year we ended up owing big time. To the tune of $3,500. Remember that? Not fun.
We were pretty nervous when the time came for taxes to be calculated this year. Given the new job (and all the additional withholdings/taxes), we had no idea what to expect. We’d continued making estimated quarterly payments on hubs’ income (albeit probably a bit meager compared to where they should have been), but given our giant bill last year it was a bit of a hold-your-breath situation to finally get them sorted out this year.
And – drumroll please –
We’re officially among the nearly 80% of Americans to receive a tax refund this year!!!! (statistic source).
According to the IRS’s website, the average refund is nearly $3,000 (source). We aren’t anywhere near that figure (we’re receiving under $1,000), but I’m just thrilled to not owe money this year!!! Hallelujah! Last year I made a big deal about not over-paying taxes because it’s essentially an interest-free “loan” to the government until you receive the tax refund. But at that time, several commenters mentioned relying on the refund as though it was a big bonus from work or something similar. I still prefer not over-paying by a large amount (but to each his own, and I can appreciate differing perspectives), so I thought our refund amount was pretty incredible. Our refund is coming mostly from charitable donations we made in order to receive the Arizona tax credit. We pay up to the maximum amount allowed by state, with full knowledge that it would probably be well over our income tax liability and would, therefore, be returned as a tax refund. I LOVE this about our state (first state we’ve lived where we’ve had to pay income tax), because it’s kind of a sneaky way of helping organizations we love and feel passionately about. We give them money, then if we over-pay (which we do), the government reimburses us (not the program, itself). Charitable program still gets their money, so no harm done to them. It’s kind of like picking where we want our tax money to go (on a state level). I’m no tax expert and many stipulations apply, so if you’re curious about it then I’d encourage you to do some research and meet with an accountant or other tax professional. Anywho – that’s where most of our refund is coming from, along with a little overage being returned to us from the federal government for an over-payment of taxes there.
It really puts my mind at ease to know we didn’t have to scramble this month to set up a payment plan or magically pull $3500 from our butts (like we did last year). As our cruise is on the near horizon, I was worried whether we’d have to “borrow” from the cruise fund in order to pay taxes, etc. etc. etc. But, alas, all is well in the world and we continue on with only student loan debts remaining. No “new” tax or IRS-related debts to report. : )
How did tax day go for your and your family this year? Have you filed an extension or working furiously this evening to get taxes wrapped up? Did you get a refund weeks ago? I hope your taxes worked out as well as ours did this year!