The Woes of Tax Season
February 2nd, 2010 · money, taxes
Never read this book, but I love the title.
Taxes. Ugh. Spare me the drama.
Tax season is different for everyone. It used to be a good time of the year for me, but this year and last year have been nothing short of craptastic.
Most people expect to get a tax refund after they do their taxes. Unfortunately, I’m one of the unlucky ones who wound up having to pay this year. >_<
What happened last year? I lived in Wisconsin, then Minnesota, then Wisconsin. Wisconsin and I disputed over which state I was a resident of, and long story short, Wisconsin demanded all the money that the state of Minnesota took out from my paycheck in taxes. Instead of getting it from Minnesota directly, Wisconsin had to go through me. So, I was missing a lot of money for a while as I paid Wisconsin and waited for Minnesota to pay me back. Moral of the story: When you have a complex tax situation such as filing for multiple states, just let a tax professional deal with it instead of dealing with the hassle yourself.
This year sucks even more. At least I got my money back last year. This year, I end up owing a big chunk of money in federal taxes. It turns out that not enough money was being withheld from my paychecks for taxes. Because my financial situation changed significantly from the past year, I was supposed to re-evaluate my W-4. Moral of the story: Update your W-4!
Just in case you weren’t aware, here’s how our tax system works:
- When you get a job, you fill out a W-4, which tells your employer how much money to take out of your paycheck for taxes.
- When tax season comes, your employer will give you a W-2, which shows you how much you earned and how much was taken out for taxes.
- When you do your taxes and end up with a refund, then you overpaid. If you have taxes due, you underpaid.
The W-4 is that thing that asks you how many dependents you can claim, and it boils down to that exemptions/allowances number. If it’s a “0,” then you’re not claiming anything, and you’re getting the maximum amount taken out of your paycheck for taxes. If it’s a “3″ or some other number, then less is taken out of your paycheck for taxes because you’ll have certain tax benefits which will cause you to owe less in taxes (i.e., having children to take care of).
Anyway, don’t be like me and ignore your W-4; look at it every year and make sure it reflects your current tax situation. Otherwise, you could get hit with a big bill when it comes time to file.
Also, since taxes (and finances in general) are a big deal, make sure you’re well prepared. Here are a couple resources that you might find useful:
- HowStuffWorks: How Income Taxes Work. Simple explanations are always nice, and HowStuffWorks does it well.
- Mint. It’s a cool site for keeping track of your money. Just to be fair, there are alternatives (PageOnce, Wesabe, Yodlee, etc.), but Mint’s pretty awesome to use, so I’m sticking with that one.
- Use a Google Spreadsheet for quick budgeting needs. Excel, OpenOffice, and Zoho are good, too, of course.
- Use a reminder service to remind you to pay bills and check your finances. Outlook, Google Calendar, and Remember The Milk are good candidates.
- The IRS website. Sometimes you just have to go straight to the source. Don’t forget to check your local state website, too. Mine would be the Wisconsin Department of Revenue.
My W-4’s been updated, and I’m no longer hopping between two states, so my tax season nightmares should finally end by next year. Good luck filing your taxes; hopefully they turn out better than mine!
Photo by numberstumper