New to BFS?

If you are new to Budgeting in the Fun Stuff (BFS), please click here. It'll give you a little background and a starting point for browsing BFS. See you in the comments soon!

As Seen On

Forbes

Yahoo
DailyFinance

Get Rich Slowly

House Logic

Categories

Check Out My eBooks!!!

How I Make Money Blogging Managing Your Monthly Nut

$5100 Tax Refund – Oops and Yay!

We just did our taxes and found out that we overpaid by $5100!  Oops and yay!

Itemizing was Finally Worth It

Self-employment has positives and negatives.  The largest negative is that we pay the employer’s part of social security and Medicare taxes, which means that we hand over an additional 7.65% to the IRS along with our normal taxes, but blah, blah, blah.  That’s definitely a first world problem.  This post isn’t to whine.

Since our current home does rack up the mortgage interest, itemizing our deductions for 2013 was financially beneficial to us for the first time ever.  Before this, the standard deduction was always higher for us.  I know that having $17,000 in deductions isn’t actually a good thing since it means we spent more than before, but I’ll take the silver linings that I can get.

Taxes

Why It Couldn’t Be Easily Avoided

Four years ago, I would have hit myself upside the head for letting the government borrow $5100 for me interest-free.  BUT, estimated quarterly taxes are only super easy if you take the previous year’s tax return, divide the total owed by 4, and then send them that amount 4 times throughout the year.  :-)

We never really know if we will make less or more, but at least this divide-by-4 method guarantees that we will be penalty-free when April rolls around.  And to ensure we don’t cry if we do make more than expected, we save big chunks of any extra for taxes too.   In the end, this method works for us, but it does mean that we’ll be giving out free loans some years.  There’s worse problems.  ;-)

Our Plans

Drumroll please…we’ll be using this $5100 for…wait for it…our 2014 Roth IRA’s.

Yep, we’re exciting people.  Seriously, this makes us really happy.  This $5100 along with what we already have put aside will max out our contributions for 2014.  That will check off our first main goal for this year!!!  Woot!  Then we can move on to the others we still have left like the car fund, an extra money account which may be used for a second rental property, and then the fun ones like our summer trip.  So this is putting us closer to the fun stuff!

You’ve been asked a million times about your tax refund.  So I’ll say, mix it up and ask or comment about anything you want!  How was your breakfast?  I just wanted to share our recent tax hijinks.  ;-)

Be Sociable, Share!

12 comments to $5100 Tax Refund – Oops and Yay!

  • Nothing wrong with contributing to your Roth! We are also getting a tax refund this year, and that’s exactly where our money is going as well!

  • Lefty

    Our net refund from federal, state, and local will be about $20. I’m planning to blow the whole thing on pizza! (Seriously, I’m thrilled to get everything that close.)

  • MikeS

    Breakfast was tasty. Not all that healthy, but tasty. Congrats on getting the money back. How was your breakfast? Or is it lunch by the time you get up?

  • @Dee, yay for a fellow contributor!

    @Lefty, way to go!

    @MikeS, I had a glazed donut – so it was yummy but I’ll need a banana in a couple of hours. I used to get up right before lunch, but pet sitting got me back on a semi-normal schedule.

  • bob reimer

    My wife and I pass the “itemized deduction” mantle over to you and yours. We got the itemized bonus every year, starting back in 1983 when we bought our first home. This year was the first time since then that the standard deduction was a better call for us. It was close, with property taxes and charities nearly hitting the $12,200 (*memory check*) mark–but not. Once we paid off our mortgage (three years back) and maxed all our income-deferrals for retirement (so lower State taxes to list here), not enough was left to add up for a claim. As you said, “first world problems.”

  • Sweet. I’m coming out a little bit closer to zero than that. I’m getting $1600 back from my federal taxes and paying $800 in to state. The remaining $800 will just sit in our checking account, unloved and ignored.

  • That’s awesome Crystal! Not just the amount of the return, but what you’re using it for – especially since it’s a goal you can check off the list. Nothing feels better than getting goals accomplished and behind you :-)

  • That is a huge step towards the fun stuff and one of the best things you can do with a tax refund!
    I just maxed out the 2013 ROTH IRA, so I have $5,500 to go for 2014!

  • Well, I way UNDERPAID and as a result just wrote a very, very big check. Sigh.
    It won’t happen ever ever again, though, because now I’m an LLC and my payments are carefully calibrated.
    For breakfast I had homemade yogurt with rhubarb compote (from ‘barb we grew).

  • Why not roll the refund over to 2014? It would give you more cushion in your monthly budget and replace one of those estimated payments you need to make this year.

  • @bob, LOL, yep, we’ll take the itemizing baton from you. :-)

    @Jason, I love how you think and word things.

    @Sher, exactly!

    @Mortgage Free Mike, go, dude, go! :-)

    @Donna, that stinks. But your breakfast sounds yummy. Are you going to write a post about the pros of becoming an LLC and how to do it? A tax lawyer here said that it wouldn’t be beneficial to us until we were making about $75,000 more a year than we make now.

    @Wendy, the est. quarterly tax form (1040 ES) wasn’t super clear on whether the $5100 would be applied to this April’s $7500 payment directly, or if it would just reduce the overall and we’d still have to send in hefty chunks (like $6250 every time). So we just signed up for a direct deposit refund and will be sending it $7500 for these quarterly payments instead of $8100 like for the last 2 years since we are expecting a similar year to 2013.

  • Kim

    We found out we didn’t owe nearly as much as we thought so the leftover when right into Roth and solo 401k. It’s not exciting, but will serve us much better than going out to buy something stupid.