Thursday, February 22, 2007

Things I learned while filing my taxes.... 

Basically, I am killing time tonight while making scans of medical records. The rheumatologist's office wants copies of asolutely everything BEFORE my appointment on Wednesday. Since I have seven years and about a dozen doctor's worth of stuff, I'll probably be at this all weekend so I can get these to the office Monday or Tuesday.

Anyway, I filed the weirdest tax return of my life today. Between the federal and the state of Colorado (South Dakota has no state tax, yayyy), my return was THIRTY pages long! It included forms I'd never heard of before.

Even though I profess to hate numbers, since I've handled all the finances and taxes for Dan and I for eleven years now I've had to develop a grudging respect for them. And I've got to admit the stats for 2006 versus 2005 are quite surprising. I mean, I knew on a certain level that things were pretty dire for us financially last year, but to see it all down in black and white was sobering.

To start with, our income for 2006 was half what it was for 2005. This is including my SSDI. Now I don't feel so guilty for having trouble making ends meet.

Our expenses were through the roof. The deductible stuff was a full 95 percent of our adjusted gross income! No wonder our savings ran dry in November.

We did NOT have to report cashing out our nonqualified annuity as income because we had actually paid more into it than we got out and so were operating at a loss. This kept us in a lower tax bracket, so low in fact that we ended up with a CREDIT for paying into Dan's 401(K) during the first part of the year when he still had that nice cushy job in Denver. I'm pretty sure that won't happen again as Dan's current income is too low now for us to be able to divert much into a retirement fund.

And because we stayed in the lower tax bracket, only one-fifth of my SSDI lump sum payment ended up being taxed. And I found out that my lawyer fees were deductible, which was another big sigh of relief. Next year's taxable percentage of SSDI should be about the same.

Our effective tax rate after all those deductions was less than two percent! I thought this had to be an error at first, but no, it checks out. This is down from 8.5 percent in 2005.

Of our deductible expenses, a full THIRD of it was for medical! I wonder how many thousands or maybe even millions of people spend a third of their income on medical expenses, even with insurance? Unfortunately, this is not a problem that is gonna get any better for most people; at least I should be eligible for Medicare later this year.

We drove over three THOUSAND miles for medical care in 2006! Damn, Denver is a huge city! I drive probably 10 miles max to see a doc in Sioux Falls now.

It is a pain in the ASS to file partial-year resident taxes in Colorado! All these questions about which expenses occurred in Colorado and which occurred elsewhere. And damned few instructions or guidance, even from the state of Colorado itself.

One-sixth of our deductible expenses were related to moving. We got to include not only the moving company charges but also mileage to move stuff in our Saturn and lodging for two nights. You can only do this if the move is related to a job that is more than 50 miles from your residence.

We got credit for the federal excise tax thingy. We didn't have to get out old phone bills and add up the taxes if we didn't want to. We just said we had long distance service between 2003 and 2006 or something like that.

TurboTax wouldn't let me file my return until I listed my occupation. I was stumped for awhile and then finally typed in "disabled". It took that, so I guess it was ok.

A fourth of our deductible expenses were mortgage interest. And we got to deduct points on the new mortgage, which was way cool. We shouldn't have nearly as much mortgage interest for 2007 with only one mortgage and only half the payment of our house in Denver.

Our payments to charity were only one-quarter in 2006 what they were in 2005. Yikes. Unfortunately, I don't see that changing much until our income increases.

We didn't have to include any profit from the sale of our house as income. That's because it was worth under $250,000 and we lived in it eight full years before selling it. Funny, I didn't think of it as a low-priced house until I filled out that form, heh heh.

The Social Security Benefits and the Earlier Year Lump Sum worksheets are complicated sons of bitches. First, you have to factor the taxable amount of the total payment plus your spouse's income. Then you get to figure out percentages for prior years, which is tricky if you haven't got TurboTax to help you out.

I swear, there are worksheets for everything. We had to fill one out just to determine whether Dan's new job in Sioux Falls was more than 50 miles from the one in Denver! Duh!

So what am I gonna do with the refund? I'm gonna pay down credit cards with it. I'm seriously bummed I won't be able to pay them off, but I have to set aside some funds to fence the yard and to pay for various lab services that our insurance has decided not to cover.

On the bright side, I THINK we can pay off all the cards in a year IF we stick to a tight budget and IF there are no further financial catastrophes. Problem is, Dan has never in his life been on a truly tight budget, and the medical expenses this year have already exceeded an entire month's SSDI benefits. But I'm going to try to stay optimistic anyway.

I'm finally on my last scan from a particular segment of records. Good stopping place.

Guess I'm poor on paper but rich in love.

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