This weekend I got around to completing my taxes, and without much surprise I’m owning the government $1,800 in taxes. You may think that I’m nuts for liking the fact that I owe the government taxes, but I’m okay with that idea. Hopefully all of you are on pace to wrap up your taxes before the April 30th deadline. Rather than filing an extension and putting the whole taxes idea on the back burner – do it now. You’ll be glad that you did and at least you can relax without having to be in the dark on whether you owe and how much you actually may be owing.
Going back to my tax situation and me being okay with owing taxes, I know it’s not often you hear someone say that they enjoy owing the government money. Most consider it an inconvenience, but not me. Honestly I’ve only owed taxes once before and that was in my first year of college. I had two part-time jobs and a full-time job over the summer, and my earnings reflected it. Even paying for my first year of college and claiming the tax credit, I was still left owing taxes.
I don’t remember the details very well, since this was well over ten years ago, but I didn’t forget the I was cheezed. Eventually I paid the government what I was owing and since then I never owed anymore taxes. That was the case until this year.
The difference this tax season versus the previous ones is that I prepared my self ahead of time. I psyched my self and realized well before filing my taxes that I was going to be owning some money. Just wasn’t sure how much. More importantly I prepared my self for this scenario by putting away $150 per month to cover this expectancy.
Furthermore, I didn’t get down and turned this scenario into positive thinking. Owing taxes at the end of this tax season was a good sign for me, which simply means I earned more than the previous year. And I’m proud to say that I did earn more – my income spiked up 23.5% from the previous year. This was mostly due to new income streams generated through my two side businesses – this blog and my commercial cleaning business.
And while the increase in my income means that I’ll end up having to pay a lump sum of $1,800 to the government, I really don’t mind for the most part.
Looking back now I wish that I contributed a larger lump sum to my RRSP. However, I’m happy with my overall contribution throughout last year and the lump sum contribution I was able to make before the February 29th deadline.
There were also a few things I learned through filing my taxes this year:
1. I paid more in taxes than what I actually saved. I happen to fall into a 31.15% marginal tax rate, and I managed to save roughly on average 15% from my gross income. This figure is disturbing to me. Somehow I hoped to have saved more, but the numbers don’t lie. I sure hope you did better than me in terms of savings, because the reality is that most people pay more in taxes than they save. I’m certain of this, and don’t have to go very far to see this, because most of my friends are terrible savers despite pretty decent incomes.
2. I truly am thankful for the money I make. You may think that I’m slightly nuts for being okay with paying taxes, but I’m okay with that idea. As they say; “You can’t suck and blow at the same time”. In my case this translates to; I can’t expect to increase my income my over 23% and expect to pay back something. If this was the case in every tax situation we’d all be millionaires.
3. I need to get creative this year and prepare my self much more for tax season 2013. So, I decided to bring my accountant on board. We’ve agreed that for $50/month, he’ll handle both of my small business taxes and we’ll meet every three months for a debriefing on where my businesses stand and what course of action to take, if any at all. More importantly though my receipts will be submitted at the end of every month. My reason for deciding to go this route is to maximize every possible tax credit available, and to ensure that the numbers are even more accurate.
In the end I’m happy with my progress and income last year. It was a pretty successful year overall. I’m thankful for the opportunities that presented them selves, the income increase and the ability to gain control of my finances through debt elimination and better money management. I hope you understand now for my reasons on being okay with owing taxes. I’ve come a long way in a short amount of time. From a guy who once lived pay check to pay check to someone who’s saving for retirement, taking on additional income, eliminating debt and more importantly finally gaining control of my finances.
Thanks for stopping by and taking the time to read.