As my life gets more complicated, so does my tax return.
When I first entered the work force and I had to fill out a W-2 form, I looked at it in cross-eyed confusion. Exemptions? Wha’? When I got my first pay check I was giddy and excited…until I saw all the money they took out for taxes. And when tax season came I only filed a return because my mother told me to. She volunteered to be my personal accountant and didn’t charge me any fees. I just signed my name on the line and trusted that she knew what she was doing.
Then I started to make money outside of my full-time job and became utterly confused about Schedule C’s and 1099 forms and self-employment tax. Was I supposed to be making estimated tax payments during the year? Huh? What? So I eventually cracked 6 years ago and paid $20 for software instead of trying to read and understand all the forms. TaxAct asks me odd questions, like whether I own farm equipment or if I had depreciation this year, but it also takes care of all the tricky stuff that comes with freelance income. It also reminds me that I get points off my return for being a renter, paying tax on student loans, and for all those medical bills last year.
Most of the time spent on my return is spent adding up all these miscellaneous expenses, trying not to forget anything. How much did I spend on postage? Domain names? Don’t forget to count the PO Box charges! Then I had to nag someone for a 1099 form that they were supposed to send but never did. If there were any discrepancies between what they reported and what I reported, I’d practically be begging the IRS to audit me. And the medical expenses, dear God, the medical expenses. It took hours to organize all the receipts and claim notices and prescriptions to figure out exactly how much I’d spent, praying and hoping it was a high enough amount to get a higher deduction. Otherwise all the time would be for naught.
I’ve considered getting an accountant, but I don’t want to spend the money on one. I seem to be doing ok figuring out all these numbers on my own. $20 isn’t that much to spend and it’s more than my mother pays. She’s hardcore, working out all the numbers with pencil and paper on the kitchen table.
After working on it on and off for several weeks, I finally filed my tax return this week. For the first time in a long time I’ll be getting a federal refund. I’ll try to focus on the refund and not all the money I paid in estimated taxes during the year. But at least I didn’t forget to write off the tax software as a business expense.
Karen says
March 6, 2009 at 9:31 amI’m a p/t tax preparer so I know how complex filing your return can be. Congrats on filing estimated taxes – most folks with their own business on the side don’t bother.
The software from HR Block, TaxCut, can import data from Quicken. That might work for you. Also, I take a shortcut with medical expenses. My insurance company will give me a $ amount that was my responsibility and my pharmacy provides that as well.
PS. Tax prep fees for a return with a Sch C are probably $300-400, so think of what you saved!
Meg says
March 6, 2009 at 9:36 amI’ve been toying with the idea of getting an accountant for years. I suppose once I actually start making money as a freelancer on a regular basis I’m going to need one, I had enough trouble with multiple w2’s!
Dyan says
March 6, 2009 at 10:36 amIf you make money off this blog, then I think you can take off expenses, like your groceries because you write about them.
I write about food and develop recipes as a freelancer and I can deduct all my groceries because they are a research expense.
gfe-gluten free easily says
March 6, 2009 at 10:39 amThis is a great post and very timely for me. I have been wondering how I am going to keep things straight with my self employment on the side. Thanks so much, Jeannette!
BTW, I found you from Stephanie’s beautiful new blog, Totally Together, that you helped her with. Very nice! (BTW, I am going to contact you myself because I have had some of the issues that Stephanie has. )
Shirley
PastaQueen says
March 6, 2009 at 10:39 am@Dyan – I considered that, but as I interpreted the law I can only deduct expenses I wouldn’t have if not for the job. So I can’t deduct all my groceries, just the things I bought for the blog.
Rosemary says
March 6, 2009 at 11:28 am“Intaxication”
That giddy feeling you get when you find out you’re getting a tax refund until you realize they are giving you back your own money!
dawn says
March 6, 2009 at 1:26 pmI used to work for a CPA and am pretty good at doing my own taxes and I started using taxact last year and I love it!! It’s very simple to use. I don’t have to buy/load new software every year. It does comparisons….
As you know, the hardest part is organizing and compiling all your info…but you do that and take it to a tax preparer anyway!
Start adding kids/investments/financial planning and maybe then it will be better to hire a professional. ;-)
Becca says
March 6, 2009 at 1:38 pmI go to an accountant because it’s all I’ve ever done. But my boss hires an accountant to come to her, and the accountant only charges $20 per hour. Maybe you could hire someone for an hour to just help a little if it would put you more at ease.
Rachie says
March 6, 2009 at 1:51 pmHoly CRAP, I hate doing my taxes. I do them at my parents’ house so I can hound my dad for help when the time inevitably comes and so I can use their software for free. We all hate tax day–me because I almost always have to pay (last year was the best year I ever had where I actually broke even–the three previous years I had to pay… a lot.) and my parents because I’m so grumpy once I have finally quantified just how much (more) of my hard-earned money I have to give away. Thankfully, last year I started keeping track of how much I was making freelancing and setting aside 1/3 of the income for taxes. So I’m hoping to actually get to *keep* some of what I’ve set aside. Fingers crossed!
I’m dreading doing my 2009 taxes since it will be 100% freelance income. : /
I’m too cheap to hire an accountant, too. :)
ginna says
March 6, 2009 at 2:28 pmI think there should be a Girl Scout Badge for doing your own taxes!
Katharine says
March 6, 2009 at 3:12 pmI’m so impressed that you’re done this early! I have to gather up materials for my business (sole proprietorship), my husband’s business (very small corporation), and our personal taxes to send to our accountant so he can do our tax forms.
More than 25 years ago, I used to do my own tax forms. No way would I even try now. My father simply did not pass along his accounting genese.
Amy says
March 6, 2009 at 6:22 pmJust did mine too. I kinda like it… I’m into forms and rules and reading the code when I want to know if I qualify for something. I use online filing for free or ten bucks, never have touched a paper version since I’ve been doing them myself. I keep a spreadsheet to help me organize all the donations and mileage.
Your medical stuff must’ve been crazy if you got deductions for that–it has to be like 7.5% of AGI! Even when I got all new teeth I didn’t hit that (but I did have the fortune of tax-freeness up to the IRS limit through flexible spending plan, thank goodness). Anymore my student loan interest and stuff like that can’t be deducted since I finally make enough that the govt stopped feeling sorry for me. It’s a good problem to have though.
Susan says
March 7, 2009 at 9:35 amCongrats on muddling through it yourself. My husband is self-employed and I tried for a couple of years to do it myself and finally broke down and got an accountant. We got lucky and found one who isn’t that expensive and was way cheaper than the penalties we paid for me not keeping up. Kudos to you!
Ellen says
March 7, 2009 at 1:42 pmWe just finished ours last night!! We had a celebration, cause damn, it was a long journey. This is the 5th year we’ve done our own with a business and jobs, and I learn new stuff each year…This year’s lesson was “do our business bookkeeping THROUGHOUT the year, not all at once at the very end, cause WOW it takes forever!!
Brenda says
March 7, 2009 at 6:23 pmBest $100 we spend every year is for our tax guy.
Heather says
March 7, 2009 at 11:21 pmJust did mine today. I don’t have a lot of complications, but I still can’t figure it out myself. I went down to the Public Library at 7:00 am this morning to get a spot with the AARP volunteers who work every year for free. It doesn’t cost me anything, I just have to get up early on a Saturday to get a spot. I’ve become friendly with the lady who’s done my taxes the last few years! Yay for you doing it yourself with TaxAct!
Denise says
March 10, 2009 at 12:27 pmI actually work for a company that develops tax software and even *I* loathe doing my taxes. It does feel really good when you’ve finished and filed, though, doesn’t it?