Confessions of a Laid-off Lawyer

Just Your Average Joe Blogging Away His Debt—In One Year or Less

Tax Day

with 14 comments

Total Black: $734.79
Total Red: $234,846.52

Yes.  It’s Tax Day.  At least in the United States.  I filed mine today. 

I awoke this morning with a sizable headache.  I had intended to get to the gym for 6am.  Yeah, that didn’t happen.  I didn’t have to work late last night so I stopped at a nearby Duane Reade, a New York-area pharmacy / convenient store chain, and grabbed a beer and some chips.  I watched Lost on and then drifted into oblivion.  Unfortunately, I drink so infrequently these days, and with the amount of stress I’m currently carrying, it seems that even the slightest drop of alcohol leaves me with some sort of head pain the next morning.

Finally around 10am I got out of bed, showered, dressed, and sat down at my desk to work on taxes.  I checked Turbo Tax’s website and figured I’d give it a try.  About six hours later, I finished.

Initial complications stemmed from where to allocate the $1,000.00 I received from the Colleague and the $1,000.00 earned in commission through the Recession Art Sale.  At first I set both up as a business, then included some of my expenses—the USB flash drive mentioned back in B(l)ack in the Red again, for example, plus color copies, business cards I printed out, and so on.  But by the time I made it through federal taxes and on to New York state, I decided that was not a smart plan.  Yes, technically my work as an attorney, solo practice work, could be considered a side business, but New York state was going to slap me with all sorts of unincorporated business taxes.  So I quickly backtracked and deleted those businesses and just added in $2,000.00 under miscellaneous income.

When all was said and done, I only owed roughly $2,800.00 a piece to the IRS and New York State.  I say “only” because given roughly $16,000 owed in 2007 and $28,000 in 2008, $5,600 is a drop.  Turned out that two employers last year didn’t withhold any federal income tax!  Infuriating.  With direct deposit, I mostly ignore paystubs.  Sure I’ll glance at it from time to time, and I do keep them all, but I definitely didn’t notice a blank for federal income tax.

I don’t get how you can fill out the W-4, but then your employer just doesn’t withhold tax?  There should be a fine or something.  Yes it’s my responsibility to check, but if that’s that case, then just eliminate the middle man altogether and make me pay the government directly.  As it’s set up now, employers are the channels through which the vast majority of us pay tax.  And when they don’t withhold it, the individual is the one screwed.  Now I’m wondering if I earned everything I should have.  I certainly wasn’t getting megabucks back in November and December: the months when I started with these two employers.  New World Stages was one who didn’t withhold federal income tax.  Thankfully, I didn’t earn that much from the theatre in 2009.  But the agency that staffed me on the Bah! Humbug! project didn’t withhold federal income tax as well.  So that, coupled with IRA withdrawals I took in beginning of 2009 to help float me while on unemployment—I suspect that’s where the federal tax owed stems from.

New York state tax was taken from every job, so no problem there.  But you’re not able to have state tax withheld from unemployment benefits.  At least not in New York state.  I had federal income tax withheld, if only as a demonstration of good faith to the IRS that I desire to pay my taxes even during tough times.  But I guess New York still gets to tax you on unemployment benefits at the end of the year as income.  That, and IRA withdrawals, are the only sources of income I can cite for owing New Y0rk state as well.

I’m not able to pay either tax today, unfortunately.  Rent was due on the 1st and tomorrow’s check will be almost completely allocated to cover it.  But I’ll get these paid off as quickly as possible, especially since they’re so small.  And since New York state, in particular, is so vicious.  I do not need another tax lien on my credit record!

That check from the Colleague sure would come in handy now!  Two weeks and it still hasn’t arrived.  Maybe he was just foolin’.

14 Responses

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  1. Red went up. What happened?


    April 15, 2010 at 23:46

  2. What ever happened to the pro bono client?


    April 16, 2010 at 08:50

  3. Wasn’t there a post a few months ago about how one of LOL’s online account balances was 4k lower than it should be? Maybe this is just a correction?


    April 16, 2010 at 09:02

  4. I suppose we should just wait for Joe to tell us, but I would guess that either A) Yes, he included the 4k he owes to his mom in the red now, and/or B) He has increased tax liability due to income earned in 2009.

    Hey Joe, any luck getting those credit card rates down yet?

    You’re stressing me out with those nearly 30% rates…that is usury, friend.


    April 16, 2010 at 11:21

  5. He already included the amount owed to Mom. That’s what brought the amount up to $230,000. This is something new.


    April 16, 2010 at 14:34

  6. See “Black and White and Red All Over.”


    April 16, 2010 at 14:36

  7. Just read the post…

    I hate to admit it, but you’re even more financially ignorant than I had previously thought! I don’t know how on Earth you don’t notice no Fed Tax coming out of your checks. Considering that is such a large chunk out of every check, your curiosity should have been piqued at the first sight of what you brought home/had direct deposited!

    Well, live and learn, I guess. I doubt there is any way you have enough “business expenses” to be able to claim a deduction anyway, and besides that, without mortgage debt, property tax, etc. I can almost guarantee you would be better off with the standard deduction anyway, so there is no reason to mess around with treating your various sources of income as anything other than the ordinary…

    I am not being intentionally harsh…just being straight. You should not go a whole year and not know what is going on with your paycheck.



    April 16, 2010 at 16:32

  8. Ok. Did you read the post? What about prior
    ones too? I was unemployed from October 2008 until Septembe 2009. Both jobs, which didn’t take out taxes, I didn’t start until November. So . . . I didn’t go a year without looking at paystubs. I didn’t bother with the theatre since it wasn’t that significant income-wise. The contract attorney job, yes. I checked. But the paystub was so oddly structured, the data so oddly situated, that I thought I just didn’t understand their system.

    And, as I said above, I didn’t suspect that an employer would just ignore an employee’s W-4 and not withhold taxes. Now I’ll never not check again.

    Laid-off Lawyer

    April 16, 2010 at 20:48

  9. Maybe someone has already made this suggestion,

    I think your blog is great btw.


    April 16, 2010 at 23:36

  10. I would assume the tax debt for 2009.

    Louisiana Solo

    April 17, 2010 at 01:12

  11. So you’re saying you owe $5000 in taxes based on only November and December income?

    You must be in a higher tax bracket than me even though you have less income. That doesn’t sound right either.

    Also, in the future, if you want to avoid penalties, you can always make quarterly payments that supplement what has been taken out by your employers. You need to bring up your total tax paid to 1/4 of what your total tax bill was the prior year and you can be guaranteed you won’t have penalties/fees for underpayment.

    I’ll lay off, as it seems like you’re getting a bit testy about my comments.



    April 17, 2010 at 07:45

  12. It is possible for LOL to owe the IRS if he did not authorize withholding from his unemployment compensation. I believe individuals have the option of withholding 20% for unemployment. So, if LOL did not do the 20% withholding, then he will owe tax on the entire amount of unemployment income (minus $2,400). An IRS tax liablity of $2,800 for a single taxpayer sounds about right.


    April 17, 2010 at 10:16

  13. No, that’s not what I’m saying. As I stated in the post above in reference to federal income tax: “So that, coupled with IRA withdrawals I took in beginning of 2009 to help float me while on unemployment—I suspect that’s where the federal tax owed stems from.” That = the two jobs that did not withhold any federal income tax. I suspect that I owe because of untaxed IRA withdrawals and because of the jobs. $2,800 isn’t all that much, but it is a lot for me right now.

    I only get “testy” when people question my intelligence. Of course I look at my paystubs. But I don’t scrutinize them. All sorts of taxes are withheld: medicare, social security, SDI, state, local, federal, etc. I just didn’t notice that federal income tax was missing as one of those. And I certainly didn’t notice any extravagant amounts in my paycheck, especially since I was barely making ends meet in November, Paycheck to Paycheck for example, and December, A Cold Blustery Walk Home. So I will have to find a paystub from that agency and verify what’s going on.

    Laid-off Lawyer

    April 17, 2010 at 12:23

  14. I never questioned your intelligence, but what I did question was your attention to detail when it comes to many things financial.

    Maybe it’s just me, but whenever I would get a new job or if there was some change in the way my paychecks were formatted, I WOULD scrutinize everything, at least that first time, to make sure things were as they should be.

    I would advise that you do the same, because there is more at stake than failing to see whether federal taxes are being taken out. You may be being short-changed by your employers–not at all unheard of, especially at temp agencies.

    Also, in the future, when you take a withdraw from an IRA you should always withdrawal the amount that you want + additional to cover the taxes and either submit it as a quarterly payment or set it aside in escrow somewhere for the end of the year. This also is a lack of foresight…you knew when you took the withdrawal that you were going to have to pay the piper, so you might has well have added that to the total red back when you made the withdrawal.

    Seriously, if you don’t pay closer attention to these kinds of things you are going to go more steeply into debt very very fast when you start with your new pay cut as the clerk. You need to be more vigilant than ever, with every single penny. It is going to be near impossible to stay afloat as it is, so you don’t need “surprise” fees and penalties popping up at the end of 2010.



    April 17, 2010 at 21:04

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