Taxes Done, Damage Tallied

I took President's Day for an opportunity to catch up on some chores -- and taxes counts as a chore for this girl -- before enjoying the beautiful almost spring-like Bay Area weather.  Finishing taxes and then heading out to the dog park on a nearly 70 degree day?  You'd think it was April.  Nope, I sat down with TurboTax to finish up both federal and state taxes a full two months before the oft-dreaded 4/15.

I've been anticipating owing, and am fairly comfortable with that concept.  PF bloggers can go on and on about why it's better to end up writing that check (literally or by direct debit, etc.) to the IRS than to overpay during the year.   But really, does anyone LIKE handing over even more of their hard-earned dough?  I certainly don't, but I can be happy I am not giving up more.  It could be worse.  Although I know I'm not the only one who likes tax refunds, I am okay with paying up come tax season.  In fact, the past two years -- my only tax periods as a full-time employed adult in the real world -- I've gone on knowing I would probably have to pay despite having my withholdings theoretically optimized for my job.

What's my tax culprit?  The 1099-MISC.  I won't blame the 1099-MISC though, because it really just means I got some extra income!  I got a few thousand last year as a small fellowship/contract, which was money in the bank without having taxes taken out by an employer.  Knowing I had received that cash bump last summer, it's been almost 8 months that I knew I was going to have to pay up.  I'd been hoping that it would be cancelled out by the deduction for my student loan interest paid.  The year before I had several 1099-MISCs arrive in the mail for contract gigs before my full-time employment began and a side job or two. That added up to a higher total amount for self-employment taxes.

I also had to navigate trying to deduct business expenses on TurboTax without paying up for the version that's more accommodating to small businesses.  Because really, when you just have one 1099 to deal with should you need to pay another $40 to figure out the tricks?  To get around it, I did a healthy amount of googling and skimming IRS publications for guidance.  That helped me understand the questions and spaces in TurboTax better and make sure I did everything correctly.  (Hello, I do not want an audit coming my way or having to explain my confusion later.)  This complicated by the fact that I did not have a great receipt system for my two week trip related to this 1099-related "work" last year.  I had to be in another state for two weeks, but had housing provided.  To meet my tax prep needs, I took advantage of my bank's handy online statements and was able to accurately look up the biggest expenses and get an account of my meals during the travel.  Thanks to the tax software and publication guidance, I felt confident that I got my final deductions right:  the full cost of my airfare and taxis and 50% of the daily meal allowance rate (from gsa.gov).  Together, this reduced my income from the 1099 or my "small business profit" by about $900.

THE FINAL TALLY: All said and done, I'm paying about another $150 to the feds and about $100 to the fine, broke state of California.  My effective tax rate (ETR) comes out to 12.0% at the federal level.  My state ETR works out 8.3%.