Wednesday, February 5, 2014

Tax Trouble...Double Trouble!

So I've been working on our taxes and I am a bit disappointed this year.  Typically, we don't usually owe taxes so anything we've paid in over the prior year, we get back in a return.  Furthermore, because of the Earned Income Credit and the Child Tax Credit, we get more back than what we paid in.  It appears that is the case with the Federal taxes, however the NC state taxes has become a thorn in my side.  :/

Last year on my 2012 state return, I took a credit called the Credit for Children with Disabilities.  It is a credit designed to offset education costs for children with special needs.  I researched it and found that Brady was a great candidate for the credit.  He has cerebral palsy (diagoned at 10 months old) and, as a result, he also has severe dyslexia.  He has always been homeschooled but was tested by a school psychologist a couple of years ago so I had all of the paperwork to prove his disability.  I listed all of our homeschool expenses as well as his private reading tutor's charges and took the credit. 

This past December, I was audited on that specific credit.  I received a letter asking for additional information on Brady's disability and proof of expenses.  I promptly responded with all the required information and heard back just last week that we were not eligible to take the credit.  After talking with the auditor, I was told that the credit is only designed for children who have been in public school for at least two semesters and then pulled out because the public school was not able to service the child.  (The way the credit is written is not very clear and it was an oversight error on my part.)  As a result:  I owe the state $599.12 in taxes from the 2012 tax year.  Agh!!

Because I thought we would take the credit again in our 2013 taxes, I didn't ask Aaron to adjust our W4, which is the paycheck withholding form.  Not enough taxes were withheld, so, for the 2013 tax year, I owe the state of North Carolina over $1,000.  Combined, I have to pay in more than $1,600!  Double agh!!

Our plan is to try to cash flow the $599 within the next month.  Next, we will e-file our Federal return and holdout the amount we owe the state, then plop the remainder of the Federal refund on our debt.  We are hopeful that by the time we receive it, we will be able to completely wipe out the Bank of America Visa, which is our target debt right now.  We are sending anything and everything we can to that Visa and it's balance is just over $2,000.  I'm hoping next paycheck we can get it down to where the return will wipe it out.  If not, it'll be close!

I can't help but think that if I had gotten a surprise $600 bill this time last year, I would have cried.  I literally couldn't handle the extra stress in our finances.  This year, as much as it annoyed me, I took it with ease.  There is something about having a handle on your finances, and having an ememgency fund, that just makes dealing with surprises easier.  I'm so thankful for FPU, Dave Ramsey and his ministry.  I'm also thankful the Lord directed me to him and his program!

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