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.
#1: Start a Tax Savings Account
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!
#2: Don’t Panic
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.
#3 Don’t Get Discouraged
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?
Currently she puts more than 50% of her income towards debt, while living a frugal, fun life. In addition to her love of personal finance, art and music, she is also a karaoke master. Follow the adventure @DearDebtBlog.
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