Tax Season Blows (Again)
Posted on February 24, 2007 by Ching under Life.
It used to be that I loved tax time. Tax time to me was synonymous with two words: tax refund. That’s actually how Brian came to get his big screen TV years ago. It was a good refund year for me. Then again, we used to file separately. Now we are filing jointly and man, how that changes things.
Last year we had to pay $1600 plus in taxes. Brian and I cashed out our 401Ks from our previous employers and we got dinged big time. Cashing out your 401K is never a good idea. Any smart person will tell you that.
In Brian’s case he didn’t have a choice (if I am recalling this correctly). I think his balance was below the threshold that the firm was willing to keep without penalty. Of course, if you continue to make contributions, they don’t penalize you but Brian didn’t have another job at the time so we couldn’t make any additional contributions. The only thing to do was take it out.
I my case, I cashed out my 401K out of anger. I was mad at a credit card company for making me feel smaller than a mealworm so I decided to pay them off and never do business with them ever again. Of course, I really didn’t have the money to pay them off. The money had to come from somewhere and the only place I could get money from was my old 401K. So that’s the story there.
Last year was really crummy for us tax-wise. This year is still pretty crummy but at least we don’t have to pay $1600. We only have to pay about $800 ($150 to Federal and $650 to the state of Kansas) so it is half what we paid last year.. But we still have to pay. Man, I really miss the days of tax refunds!
Anyway, Brian is pretty happy with his current employer so there won’t be any job-hopping. I’m hopeful that the stability will help when it’s time to do taxes for 2007 next year. I could really use some refunds, specially since I’ll have to start paying on $50K in student loans. Yuck!
Of course, Brian had to point out that if we had a child we’d have an automatic $3500 tax deduction. All things remaining the same, we’d actually end up with a $2700 refund if this were the case.
The refund may seem tempting but that’s not a good reason to have children. And to be honest, raising a child takes a lot of time, love, and responsibility (among other things) so it’s not just about money. However, if you want to talk in dollar terms. The $3500 tax deduction really doesn’t cut it. The government is getting off cheap. Bump that deduction up to $10K and maybe I’ll think about it.
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