I'm frustrated.

I've worked my tush off this past year (self-employed) and made almost $6,000.

If it were not for our huge medical deductions on our taxes, we'd have ended up OWING the IRS!!!!!

Just the year before, we had approx $6,700 refund. (I only made $700 that year since I was just starting up self-employment)

This year......I made almost $6,000 in my job and our turbo tax showed that after paying taxes etc...., I actually only made $2,100. :(

My dh's pay was virtually the same for the two years.

It sure seems like it is not worth my working. I don't like it....but if I did not work, we'd not be able to pay the gas bill this winter. (since it went up so much)

Maybe self-employment is not what I thought.

Ugh. I was really hoping for at least $4,000 on our return. (and we took every deduction we could) I needed that to pay down some debt.

On the bright side, at least we don't owe. Boy, until we did the medical deductions it was looking like we'd have to pay the government and I was freaking out so much!!! :eek:

I'm just frustrated. I'm so tired from working and never wanted to work outside of being a homemaker. I don't like my job and I miss being a homemaker.

Honestly, we ran the numbers and if my dh were to quit his job as a school principal and become a teacher again, we'd be better off financially. (a LOT better off) Because our children would go on state medical, get free lunches at school, and we'd get huge tax returns again. (and I'd not have to work) We deducted how much we pay for medical for our children, how much we spend on sack lunches and the two hot lunches we allow the children to have each week, and how sucky our tax return was even with me working.

I have to admit that I kind of wish dh would quit and start teaching again....I'm just so beaten down-feeling right now. :sob:

Michelle

ARe you taking all your allowable deductions for your business on Schedule C? Dh is self employed for SS and we have to pay that tax. Feel free to email or pm me if you want to ask some questions. I have done our taxes (self employed) for almost 15 years and I have also done other tax prep.

It stinks to work for nothing!

that the less you owe and therefore if you actually were to need to pay, it meant you probably had a pretty good year!

When you are in the income range of between tax brackets it CAN turn out that one of you works for nothing! That is when you need to strategize more to make it worthwhile.

my first thought was that you need a better accountant - but i'm still sorry. that stinks

Self-employment is a tough one. :hug: I've gone through that myself some years. Sorry it feels so worthless.

I do think sometimes less is more - like with doing teaching vs. administration. Dh is purposely avoiding climbing that ladder for various reasons, financial and time, mostly.

Thanks everyone :)

We used Turbo Tax for our taxes again this year.

For self employment, do you think I got nailed for not paying in quarterly? How do I set that up anyway? (best to pay a tax person to set it up for me?)

The deductions that I was able to take were for vehicle and just the small amount I spent on supplies like ink and whatnot. I'm not "technically" a daycare center since I do respite care one-on-one with special needs children which is babysitting but not like a home-daycare. (hope that made sense) I am paid by the state of Wyoming through the Waiver program, but am "officially" self-employed. I'm not sure if any of that made sense or not.

I wonder if we are in-between tax brackets like someone mentioned.

I did just get added to another plan...meaning I may get a bit more work with a new child. (10 month old with mental delays and some medical)

I am wondering if I should get set up to pay in quarterly to the IRS....but my income varies monthly greatly. I did set aside 10% from each check for 2005 just in case we had to pay in to the IRS.....so I have the money that I can go ahead and put on a bill on our debt snowball. Hope that made sense too.

Ok, I need to get on the treadmill.

Dh said he loves his job and would miss it if he went back to teaching.....so, I guess until he moves into superintendency, we'll be taking baby steps. (or until I start earning more and working more....which neither of us wants me to do)

Thanks again....your thoughts really help me out when I am emotionally stressed and am not focusing like I should.

Michelle

Michelle - this is the 1st year I'm self employed too so I need the same answers you need.

But for the tax refund, any time you don't have to pay is a good thing. And getting too much back means that you paid too much in and the gov. borrowed your money interest free.

Is DH participating in every before tax plan that he can (401K, pretax med, 125's, etc)?

subscribing

Michelle since you didn't owe any taxes there wouldn't have been any penalties for not paying in quarterly. And I wouldn't worry about paying quarterly until you have a tax year where you actually owe taxes. I would continue to put the money away in savings so that you will have it if you need it for taxes but it will be earning interest for you and not the government.

It sounds like your income probably did put you in a higher tax bracket and that is tough.

Good point about the pretax medical expense account. You definitely need to set one of these up if you can and haven't already. I meant to post this on your other thread re: medical expenses.

This has been a huge reason I don't work outside the home. When Don and I ran the numbers it just wasn't worth it at all. We would lose our preschool scholarship, we would loose free lunches for Alex, and we would loose our tax returns. That right there totals $7,500.00 per year. On top of that we would have to PAY for childcare. So working full time I would make about $4 an hour. I SAVE that every month by being able to shop at different stores cuz I have the time (pricing items, chasing sales, comparing, buying in bulk, etc) cooking from scratch (soaking bulk dried beans instead of relying on canned all the time, etc) sewing (I actually make a little money here), and being home when my kids are home. So it never worked out for me to go back to work. It just doesn't make sense for us.

I feel you though. That spot inbetween tax brackets is a really hard place to be. I see us being there next year... with Don's new job. After that we will be making enough where it won't matter, because we will be able to put some away without the tax return "forced savings account" (we always replenish savings and pay off our two smaller cc's with it).

One thing you may want to do is reduce your deductions that come out of your dh's paycheck. In the "middle income" bracket, if you deduct just one or two less than you "could" it can save you at the end of the year. I have a friend who uses that like a savings account... she only deducts 2 from her dh's paycheck even though technically they could deduct 5... that way she always gets something back. This year it was about $2K, and they made over $50K last year. Something to think on.

Val

Michelle - this is the 1st year I'm self employed too so I need the same answers you need.

But for the tax refund, any time you don't have to pay is a good thing. And getting too much back means that you paid too much in and the gov. borrowed your money interest free.

Is DH participating in every before tax plan that he can (401K, pretax med, 125's, etc)?


Oh, these are such good points! Being newly self-employed (since I don't count 2004 return due to my only just beginning near the end of that year); I am not use to how things will change tax wise. Your comment about any time us not having to pay is a good thing made sense and I needed that perspective. We do claim our dependents since we are not really happy about lending the government our money interest free and after thinking abou it.....and your response above....well, that added to my self-employment probably is why we got the return we did.

I need to change my thinking and expectations regarding tax returns and assum that the days of large ones are gone for our family. So next year will not be a shocker.

Do you know how to go about (or what it is called) setting up the quarterly dealies self-employed persons are supposed to have going where we pay in taxes to avoid penalities at tax time? I wonder if I was penalized for not doing this on this past return.

We are participating fully in dh's work retirement plans. That is a good thing about his career....good retirement. However, following Dave Ramseys advice since we are following his financial plans....as soon as our debt is paid off we plan to set up additional retirement accounts beyond dh's at work and will be hitting those hard. (we'd rather have more than enough to retire, KWIM?)

Another thing we need to do is up dh's life insurance. I read that you need 10X the amount of the annual income if it is a single earner with one spouse being at-home parent.

Thank you for opening up my thinking here with your comments.

Michelle

Michelle since you didn't owe any taxes there wouldn't have been any penalties for not paying in quarterly. And I wouldn't worry about paying quarterly until you have a tax year where you actually owe taxes. I would continue to put the money away in savings so that you will have it if you need it for taxes but it will be earning interest for you and not the government.

It sounds like your income probably did put you in a higher tax bracket and that is tough.
I just saw this post Robin. Thank you for explaining about the penalities quarterly. Dh had thought maybe it was this way but he was not sure so now that helps me to rest easier regarding this. I'll continue to put 10% aside for this (2006) year like I did in 2005. Good advice and points. Thank you!!

Where would I look to see if we are in a higher income bracket? I did not see actual tables on the Turbo Tax software that we used.

Michelle

Good point about the pretax medical expense account. You definitely need to set one of these up if you can and haven't already. I meant to post this on your other thread re: medical expenses.
I must have missed the response where this was mentioned. I'll look for it.

But where should I look to get information about this pretax medical expense account? Sounds interesting and I know nothing about this.

Michelle

Michelle, does dh have some sort of cafeteria plan for medical expenses at school. They would take a certain amount of money out of each check and then you turn in expenses to be reimbursed? If not then I think I would google medical savings accounts and see what you come up with. Turbo tax should have told you what income bracket you were in, but also you could google this to find out what tax bracket you are in.

Let me see if I can copy this chart for tax rates for you...

If Taxpayer's Income Is... Then Estimated Taxes Are...

Between But Not Over Base Tax + Rate Of the Amount Over
$0 $14,600 $0 10% $0
$14,600 $59,400 $1,460.00 15% $14,600
$59,400 $119,950 $8,180.00 25% $59,400
$119,950 $182,800 $23,317.50 28% $119,950
$182,800 $326,450 $40,915.50 33% $182,800
$326,450 - - - - - $88,320.00 35% $326,450

I hope you can read this, here are two different sites I found with info on tax brackets...

http://www.savewealth.com/taxes/rates/jointmarried/

http://www.moneychimp.com/features/tax_brackets.htm

Taxable income is after deductions and exemptions, FYI.

HTH

Sorry I tried to make the table easier to read and it didn't work.

Just wanted to mention that if you do pretax medical for expenses, then you can't count those expenses as deductions when you file. We don't have enough medical to itemize it so doing the pretax deductions saves us a little. If you're already itimizing your medical ded. it might not help alot.
Anne

Well if you use pre tax medical then all of the money is pre tax. Where as if you wait and file the medical expenses as a deduction you are limited to 2% over the amount of your agi, so actually there are 2% of your deductions that you don't get credit for , I hope that makes senes. It is actually a better deal to take it pre tax if you can.

Michelle, does dh have some sort of cafeteria plan for medical expenses at school. They would take a certain amount of money out of each check and then you turn in expenses to be reimbursed? If not then I think I would google medical savings accounts and see what you come up with. Turbo tax should have told you what income bracket you were in, but also you could google this to find out what tax bracket you are in.

Let me see if I can copy this chart for tax rates for you...

If Taxpayer's Income Is... Then Estimated Taxes Are...

Between But Not Over Base Tax + Rate Of the Amount Over
$0 $14,600 $0 10% $0
$14,600 $59,400 $1,460.00 15% $14,600
$59,400 $119,950 $8,180.00 25% $59,400
$119,950 $182,800 $23,317.50 28% $119,950
$182,800 $326,450 $40,915.50 33% $182,800
$326,450 - - - - - $88,320.00 35% $326,450

I hope you can read this, here are two different sites I found with info on tax brackets...

http://www.savewealth.com/taxes/rates/jointmarried/

http://www.moneychimp.com/features/tax_brackets.htm

Taxable income is after deductions and exemptions, FYI.

HTH


Thanks!

Michelle