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I Owe $4,000 In Taxes!?

By Frugaling 29 Comments

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Self-Employment Taxes Photo
Photo: Philip Taylor/Flickr

Frugaling my way out of debt

I’ve been a student of some sort nearly all my life. I never worried about ponying up extra funds for a tax payment until 2013. And honestly, when I created Frugaling, I had nearly $40,000 in debt from credit cards, a car loan, and student loans. There was no way the taxman would give me anything but a fat return.

Then, a financial miracle occurred. In the summer of 2013, I began to make thousands of dollars in affiliate/ad revenue from Frugaling. The money poured in, and I was giddy. Finally, I could begin paying off all the debt — in record time.

I dropped all of it into student loan debt, and paid off nearly everything (finished the rest in 2014). My nerves calmed, and I could suddenly see freedom and future. Cheesy, I know, but my loans had dampened my spirits. Suddenly, I was renewed.

Ugh, self-employment taxes

As this new influx of funds padded my wallet, I unfortunately realized that by the end of the year, the taxman would be knocking. All of these funds from Frugaling were coming in untaxed — no withholding. These are self-employment taxes. Ultimately, this income must be declared and taxed at a penalty rate to pay for social services (i.e., Medicare, Medicaid, and Social Security).

After calculating all the money made and entering the numbers into TurboTax, the hypothetical refund reversed to a payment. The government wanted about $1,000. I sat there dumbfounded for a moment. All these advertisements and campaigns suggested I would “Get the biggest refund ever.” Those pesky self-employment taxes obliterated my student status.

It was a lesson in the difference between income and net worth. That year I had made over $30,000 between graduate student work and the website. I had barely any savings and negative net worth. Yet, I was being penalized for making money that could pay off financial aid faster. To me, it seemed preposterous that I was being taxed at a higher rate for this side income — with no net worth.

I owe Uncle Sam how much?!

In 2014, I paid off my remaining debt and my net worth has been hovering at a few thousand dollars. My stress over debt is non-existent, and I feel better than ever about my financial situation. But I’m not done with the struggle to make wealth while in graduate school.

I made over $20,000 “on the side” for Frugaling/business-related self-employment (I no longer make that kind of money, as I removed credit card affiliate links for now). After inserting my income and expenses into TurboTax, a shiver went down my spine. The numbers catapulted up over $4,000.

I’m fortunate that I’ve been saving for this moment. My savings account has enough to cover it, but my net worth will be swept away come mid-April. It feels awful to work this hard to save, make, and write. I have no net worth, and yet the funds I made will be disappearing.

But instead of letting this payment dampen my mood, I am more focused than ever on writing for you all, staying frugal and minimal, and building some real savings.

Filed Under: Loans, Save Money Tagged With: federal, Government, irs, Self-Employment, taxes, Turbotax

Get a 10% Tax Refund Bonus with TurboTax 2014

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Intuit Turbotax Deluxe Federal State Refund Return Program

Tax season is nearly here! Over the last few months I’ve worked tirelessly to reduce my tax liability. One method I’ll use to receive an even larger bonus will be Amazon.com’s partnership with TurboTax. TurboTax is the leading tax preparation software and offers some of the best features for receiving your largest deduction ever. But for every dollar of my refund I put towards an Amazon gift card, I’ll get an extra 10% from Amazon!

For instance, if you receive a $1500 tax refund and download TurboTax from Amazon.com, you’ll be able to put up to $500 to a gift card with the 10% bonus! That can quickly give you an extra $50 for doing your taxes. By receiving the $50 Amazon.com tax refund bonus, you can effectively pay for the cost of TurboTax Deluxe 2014. And heck, Amazon can sometimes help us stay frugal!

What I like about TurboTax:

  • TurboTax is an Intuit product (they own Mint.com, too)
  • It automatically calculates deductions and checks to make sure I’m getting the largest refund possible
  • The company works with collegiate expenses and student loan payments to save even more money
  • Each year’s refund and return is collected for the next year, which saves a ton of preparation time
  • The program includes state and federal e-files for rapid returns and paperless refunds
  • By downloading from Amazon.com, it includes 5 free federal tax return files
  • Using TurboTax is a terrific preventor of getting audited, as it checks to make sure you’ve included everything
  • Instant download for Macs and PCs

Follow this link to get this year’s version: TurboTax Deluxe Fed, Efile and State 2014 with Refund Bonus Offer

Filed Under: Make Money Tagged With: Amazon, Amazon.com, Bonus, Gift Card, Mint, Student Loans, tax, taxation, taxes, Turbotax

Paying Off Student Loans? Don’t Forget This $2500 Deduction!

By Frugaling 1 Comment

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1098-E Tax Form Student Loan Interest Paid
Click to Enlarge – Form 1098-E

As a student and recipient of student loans, I’ve been collecting huge sums of debt. Before I started Frugaling.org, I had amassed about $37k between car, credit, and financial aid. Thankfully, that recipe for disaster was turned around when I began writing about my new, frugal life.

Student loan interest is deductible!

I saved and made more money than ever in 2013. Despite being a full-time graduate student (at around 60 hours per week), I started making enough money to pay back my student loans. By the end of 2013, I paid off $1,785.46 of interest (just interest) owed on my student loans.

The IRS and tax code stipulates that a recipient of student loans is granted up to $2,500 in deductions from the payment of student loan interest. Again, this is only the interest that has been gained on the loans – not the principal that was originally lent. Moreover, if you make over $75k ($155k if married) in adjusted gross income (AGI), you do not qualify for this deduction. You can find out whether you qualify for the deduction here.

Golden Ticket Charlie Tax Write Off Deduction 1098-E

The use and importance of Form 1098-E

Every year that you are paying student loans, you end up contributing a certain amount in interest. In return you will receive a little golden ticket (Form 1098-E) that allows you to deduct some income tax. All you have to do is enter the corresponding boxes on a program like TurboTax and you’ll magically see a sizeable refund add up.

Pair a nice deduction with Amazon’s TurboTax bonus of 10% on this year’s refund, and you’ll be flush with cash come return season!

Here’s a link to this year’s official IRS Form 1098-E.

Filed Under: Loans Tagged With: 1098-e, debt, Form, irs, Student Loans, tax, tax forms, taxation, Turbotax

10% Tax Refund Bonus With Amazon.com And TurboTax

By Frugaling 5 Comments

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TurboTax has been updated for 2014!

Intuit Turbotax Deluxe Federal State Refund Return Program

This year, Amazon.com is bringing an awesome promotion that could net you a serious bonus on your tax refund. The online shopping company is offering anybody that downloads TurboTax through their website the opportunity to use a portion of their refund to get an Amazon.com gift card.

Let’s say you get a $2,000 tax refund after calculating all your deductions and savings. By downloading Turbotax with this Amazon.com bonus, you can select a portion of funds for the bonus. It’s pretty simple, too. Choose $500 from your tax refund to go into an Amazon.com gift card and you’ll receive an extra $50! Not only does this pay for the price of TurboTax Deluxe, it also offers you a rapid way to use your return.

Amazon.com Gift Card Federal Refund Bonus OfferWhat I like about TurboTax

  • TurboTax is an intuit product (they own Mint.com, too)
  • It automatically calculates deductions and checks to make sure I’m getting the largest refund possible
  • The company works with collegiate expenses and student loan payments to save even more money
  • Each year’s refund and return is collected for the next year, which saves a ton of time in preparation
  • The program includes state and federal e-files for rapid returns and paperless refunds
  • By downloading from Amazon.com, it includes 5 free federal tax return files
  • Using TurboTax is a terrific preventor of getting audited, as it checks to make sure you’ve included everything
  • Instant download for Macs and PCs

Follow this link to get this year’s version: TurboTax Deluxe Fed, Efile and State 2014 with Refund Bonus Offer

Filed Under: Make Money Tagged With: 10 percent bonus, Amazon, Amazon.com, Bonus, Deluxe, end of year, fiscal, Intuit, Return, Tax prep, tax refund, taxes, Turbotax

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