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Tax Time

March 11th, 2009 at 06:13 am

So I finally go to the accountant, we go over my tax situation. In adding up my 1099C-s my actual savings (also called income) in negotiating my credit card debt was $78,400. We added up my assets at the time of settlement and subtracted my liabilities and my insolvent position was $36,000 so I must pay tax on $42,400 .... ouch!! I also got laid off on my job last year and was forced to claim a 401k loan as income (I used that money to help with debt settlement). So when the accountant gets all done with me, I owe the IRS about $14,500 and the state $4,000. So I ask for tax advice from the accountant, do I pay the IRS with my left over 401k money or do I arrange payments with the IRS? Hands down, she says pay the IRS with your remaining retirement.

There may be two reasons for this decision. First of all I still have not recovered from the financial crisis and am not earning enough for a large payment monthly to the IRS and second, it puts the nightmare to bed finally. So I went to the bank and got the money knowing that next year, I have to pay tax and penalty on the money I took to pay the IRS and the state, but I hope to have enough tax deductions from my business expenses i.e. mileage, advertising, home office use and etc.

So now I have about $16,000 in retirement money left and hopefully there will be no reason to touch it. I think the housing market here in the North will be turning around soon and we should be at least stable and working some of the time. I'm looking for ways to make other income including teaching budgeting and credit counseling, but today it occured to me that maybe I should look for a job writing a monthly column in our local paper about credit, budgeting and how to save money. It could help with my business and help other people as well. I know I have learned so much going through this process.

This week I checked out and started tracking our spending. I'm watching my DH with his ATM debits again and he has headed out of control. I wish he would stop smoking; it is a major expense and it's going up all the time, not to mention the health risk associated with smoking. My DH is a cancer survivor and should definately not be smoking.
With cigarettes over $6.00 a pack here and he smokes a pack a day, that is $42.00 a week and we really can't afford it, but what do you do??

1 Responses to “Tax Time”

  1. creditcardfree Says:

    Sorry to hear the tax bite was so large. It's great that you have some resources to pay it. Stay upbeat!!

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