I finally got my taxes settled this weekend and for the first time in my life I owe the IRS money. After some back and forth, and crunching the numbers, I owe roughly $300. Earlier iterations proved to be much higher, but were due to human error (note: triple check your taxes!)
I’ve always been one to gloat over tax refunds. That has been extra money towards my student loans, partial vacation funds, and saving cushions. I was making such a low income before I got my current job (16k/yr), but doubled that this year by finally getting a full-time job. I hustled all through out this year and made close to $5k in side hustle income.
In the past 2 years I’ve been hustling, I guess the low-income and the untaxed income just evened out. This year I continued and didn’t give a thought to paying taxes on my independent contractor income.
I know, I know. Total PF fail.
I’ve really learned a lesson here. Although $300 doesn’t seem like a lot of money, it felt like a huge burden to me. It’s almost my half of the rent. It’s practically what I pay in interest per month on my graduate loan. This $300 sparked so many conversations this weekend. Because I have depleted my savings and choose to throw almost all extra income toward debt, I have very little fluid cash to work with. This means I will inevitably have to lower my student loan payments a bit, which really sucks. But here are the steps I’m taking to get through it.
After I realized I was going to owe, I immediately started a tax savings account. The great thing about Capital One 360 (affiliate link) is that you can have sub-savings account. When I got paid on Friday, I transferred over several hundred dollars to my new account to ensure that I had funds available to pay my taxes. Going forward, I will put 10% of all my 1099 income in my new tax savings account, to prevent this from happening again!
I’m not going to lie, I panicked a bit when I found out I was going to owe. Sadly, I didn’t even think that it was a possibility. I have been so focused on paying off debt, I hardly thought about my taxes. My empirical evidence gave me no reason to think I would owe. But the good news is I made more side hustle income this year! The bad news is I need to pay taxes on that biz! All this to say, panicking doesn’t help or change the situation.
The only certainties in life are death and taxes right? Don’t get discouraged. Unfortunately taxes are a part of life. You are a not alone. You are not a loan. This will be just one more thing to get over.
I will be paying my dutiful part to the IRS in the next few weeks. I will look forward to the side hustle income actually hitting my accounts in late February, early March. Although I’ve felt a bit down about this unexpected money, it just reminds me that the debt repayment journey is a process. It’s ups and downs, plateaus and setbacks; the main thing is that you got to keep going!
Have you done your taxes this year? Are you expecting a refund or do you owe?