My federal income tax refund more than a year late!
Posted on September 19, 2007
Filed Under Home Finances |
By reading the headline you might think that I should have a headache from receiving my tax refund so late. However, the opposite it true. For those of you who are self-employed or do consulting, here is why…
As a consultant myself, my income can be very eradic and sporadic, as was the case two years ago. With the sudden loss of my “steady” W2 job, I just as suddenly found myself in Europe on a 1099 consulting gig. Then a few months later, I found myself on another one in California.
Fortunately, I was running late on filing my tax return from the previous year (yes, I filed the appropriate extention forms, and I owed no money in taxes). So, when I finally had all my information together and sent in my return, I elected to apply the previous year’s would-be refund to the then-current year’s taxes. I did that because in being in a 1099 situation, there was no withholding from my income payments. That meant that I would later have to pay a bunch of money in taxes in a lump sum. So, by applying my refund to an expected future obligation, I paid my entire tax burden in advance, and was fortunate to have overpaid enough to actually get a refund.
Of course when you are self-employed, you should be filing quarterly 941’s to stay out of trouble. But when you are primarily W2 with some 1099 mixtures, be sure to either file a 941, or otherwise prepay your federal income taxes. It can save you time, money, and headaches.
Regards,
Stephen Dunbar
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