You read that title right. We pay estimated quarterly taxes based on what we owed in the previous year. So, in 2014, we sent the IRS about $30,000. So we sent them $7500 every quarter. Well, we didn’t make nearly as much in 2014 as we did in 2013, so the IRS gave us back a little more than $13,500 that we over-paid.
That said, we first had fun deciding how to use that cash AND we will be paying $3000 less per quarter to the IRS in 2015.
How We Are Using Our Tax Refund
This was the fun part, although you may disagree since we were boring. We used $5500 of it to pay back our emergency fund since we already used $5500 to fund one of our Roth IRA’s for 2015. Then we used another $5500 to fund the other Roth IRA. So, those are both fully funded for 2015 and ready to see how the market treats them.
The remaining $2500 was spread between our cash account for other investments (40%), our home payoff/new rent home down payment account (25%), our rent home maintenance account (15%), a vacation account (15% – which is good since we have two planned for May already), and 2.5% was socked away into each of our fun money accounts to do with what we wish.
If those account names look a little familiar in some way, it’s because that’s how we split up our monthly extra every month right now. It’s in our monthly budget. We are just boring people who stuck with our normal routine, LOL.
Yet, I’m a boring person who is smiling ear-to-ear that our Roth IRA’s are already taken care of, our cruise and quick trip to New Orleans in May have already been budgeted for with what we had plus this little bit of extra, and our future investment cash account is looking pretty healthy. As soon as the housing bubble bursts again, we’re snatching up 1 or 2 more rental properties. I’m betting this happens in the next few years since 7-10 years seems to be the norm between the huge fluctuations in the housing market. We’ll see…
Paying Less to the IRS this Year
Since we always base what we pay quarterly on what we paid the previous year, we will be keeping about $1000 a month to ourselves that we were sending to the IRS. We are making less now than before, but we also spend less now than before overall, so the monthly extra will most likely still be divided in the same way we divide up all extra cash at the end of our billing months. Yep, nothing crazy.
Of course, we are still putting extra aside for 2015 taxes during amazing months since we will most likely owe next year…but so is the way of the self-employment train.
If you hypothetically received a $13k refund, how would you have spent it?