human, being

Tax season mess
April 14, 2009, 10:19 am
Filed under: money | Tags: , ,

I owe the IRS money from 2005, when I decided to stop the post-divorce collectors’ calls by negotiating down my debt and distributing an old 401k to pay the negotiated amount. I did this on the advice of a bankruptcy lawyer I consulted with. I made too much money to qualify for Chapter 7, and this seemed like the best option to end the financial nightmare I’d gotten myself into. I knew I’d have some tax and penalty consequences from the 401k distribution, but they seemed worth it.

What I didn’t know–and he failed to tell me–was that I had to count the settlement amount as income for 2005. When the IRS hit me with the adjusted tax bill, it amounted to almost $10,000. So, for the past three years I’ve been paying it down, $70 at a time. Any tax refund was applied to the bill. Last year’s stimulus money lowered it by another $600.

So I was thrilled when I did my taxes this year and found that I would be getting a refund that would wipe out the rest of my debt and give me an actual deposit in my checking account.

But there’s a hitch.

My ex and I are supposed to alternate filing Head of Household and Single with Lauren as a dependent. I was supposed to be claiming her as a dependent in odd-numbered years. Somehow, I did it backwards, and my ex and I have been filing the same status every year. Which means I get to go back and refile for the past four tax years.

I may actually owe more. Which really sucks.

I know I should just hire someone to do my taxes for me. I just couldn’t afford to spend $500 to prepare my 1040 and Schedule C. Instead, I’ve been using TurboTax. Last year, both of our returns should have been rejected because we both filed as Head of Household. But they weren’t because for some reason TurboTax didn’t ask me for Lauren’s social security number.

I guess at this point I should just take the whole mess to a tax accountant and pay to have all of my tax returns fixed. One little glitch: I can’t find my 2005 file anywhere, which means I have to order all the backup paperwork again.

I’m still getting both state and federal refunds this year, but both are about $1,000 less than what I thought they’d be. I am totally bummed, because I had already recarpeted my house with the money I’d get back.


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