In my last post, I described my lower middle-class upbringing. I mentioned that my parents were terrible with saving money, and that we weren’t really taught to save either. That isn’t entirely true. We did have one person that tried to help us save money. Unfortunately, it didn’t work out the way she wanted it to.
We got a small bit of help in learning to save from our Grandmother on our mom’s side. When we were born, she convinced my parents to open a savings account for us. She gave us a check on every birthday and Christmas with “for deposit only” written on it, so we would be forced to deposit it into our savings accounts. We had the option to deposit the rest of our birthday money as well, but we rarely did.
My grandma didn’t have a lot of money, so she was only able to give us each $25 on special occasions. Over time, that does add up, and by the time I started working for my parents, I had about $800 saved up. That’s a lot for a fifteen-year-old!
I Learned about taxes the hard way
Unfortunately, the savings account didn’t work out the way my Grandmother intended. You see, when my parents started paying us for delivering papers, they set us up as independent contractors rather than wage employees. That meant that no taxes would be taken out of our paychecks. We didn’t make a lot of money, but as we all know, that doesn’t matter. The IRS still needs to get their share.
When tax season rolled around that first year, my father did our taxes for us. We each ended up owing the man around $700. My parents took us to the bank and drained our savings accounts so we could pay our taxes. They said we should have known better. We should have been putting money aside each pay check to pay. How we were supposed to know the subtleties of the complicated tax code at age 15, I’ll never know!
Making it worse
Unfortunately, I didn’t learn my lesson. I continued working for my parents as an independent contractor, and continued spending all of each pay check. When tax season rolled around, I just ignored it. I did the same thing the following year. Eventually, I stopped working for my parents and got a normal part time job. Unfortunately, by this time, I already owed the IRS almost two thousand dollars. Even worse, my father accidentally switched mine and my brother’s social security numbers on our tax returns, so we didn’t even know who owed what!
Digging out of the hole
I was a senior in high school when I realized how big my problem with the IRS was. That’s when I decided to take steps to dig my way out. Surprisingly, it was super easy to get the mess with the social security numbers straightened out. But what was even more shocking was that they were really nice about helping me set up a payment plan and get the tax debt straightened out. They are super willing to work with people who are trying to do the right thing! It took me about a year to fully pay off my debt to the IRS, but it felt good to make that last payment.
Learning about taxes the hard way had some advantages. I learned to always think about how taxes will work with any job, so I don’t get surprised with a giant bill at the end of the year. I also learned that the IRS isn’t as terrible as everyone thinks they are. One of the reasons I waited so long to call and get it taken care of is that I was terrified of calling them! All I ever heard was horror stories about going to jail for tax fraud and IRS agents being super rude to people. Maybe it was my age that helped, or maybe it was the fact that I was actually trying, but every time I called, the agent was super nice and helpful. I never had a bad experience.
One final thing I learned is to always check over all the important forms. One little mistake can cause huge complications down the road (on the plus side, I still have my brother’s SSN memorized, because I thought it was mine for so long…devious, I know!).
What lessons did you learn the hard way? I’d love to hear your stories!