During a recent tax filing season, a new tax client of mine openly cried at my desk because of her newly discovered $8,800 tax bill to the IRS and $2,200 tax bill to New York State. All primarily because she filed her taxes “married filing separately” instead of “married filing jointly” with her husband.
Married Filing Separately
Federal and state governments want legally married couples to file their taxes together and to encourage them governments don’t allow certain credits, deductions and exemptions for couples who file “separately.” It also puts couples who file “separately” in a higher tax bracket then those who file “jointly.”
Taxes for 1099 Independent Contract Work
My client also got the new tax bills because she worked as a 1099 independent contractor during the year outside of her normal 9-5 and did not pay taxes on that income throughout the year. $18,000 worth of self employment income.
To cap off her problems and to make matters worse, her job in the social services field did not take out enough in taxes every paycheck to meet her tax obligations for the year. Had she simply put zero or one on line 5 of her W-4 form, her employer would have taken out more each paycheck to meet her tax obligation.
To make my client’s life better going forward, I gave her a number of recommendations. First, I talked with her about the differences between filing separately and filing jointly. She’s going to try to work with her husband on that. Next, I gave her the necessary paperwork she’ll need to pay her estimated taxes for her self-employment.
Then, I told her to talk with her employer about changing her exemptions/allowances so she can make them as low as possible. That way more taxes are taken out of her paycheck then needed. Finally, I gave her the websites for the IRS and New York State to work out a payment plan for her outstanding debt. With all of this hopefully we’ll have a much better tax prep experience next year.