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My wife and I spent a small fortune on our accountant’s fees and taxes this week (from the WSJ: “Joel Slemrod, an economics professor at the University of Michigan, estimates that the time and money individuals spend on tax compliance now comes to about $90 billion a year.”) Because we have one income and five of us living off of it, we’ve typically gotten most of my federal withholding returned each year.  So last year I made some adjustments to have my employer withhold almost nothing from my paychecks.  We couldn’t foresee it at the time but this turned out to be a bad idea.  I had a larger profit from my business and my wife had a significant increase from her endeavors, from which we paid no quarterly self-employment taxes.  Combined with the nominal withholding from my day job, we encountered the perfect storm come tax time.  Ouch.

We’ve learned some lessons–this year we’re paying quarterly self-employment taxes.  Probably the most important lesson, though, is this: I’m not sure we realized how much we paid in taxes until we were self-employed.  When you’re having your employer take taxes out of your check, you probably don’t really pay attention.  It just happens and you get what you get–you’re more focused on the net than the gross.  When you’re self-employed, however, every dollar of income is getting taxed and you’re responsible for taking care of it.  Putting aside 1/3 to 1/2 of your net for taxes is discouraging and I felt it much more this year than I ever have.

Apparently a bunch of other folks are feeling the frustration as well and have organized Tea Parties in cities throughout the country today.  It will be interesting to see if this produces a groundswell of grassroots activity or just fizzles before it gets started.  Evidently there’s one about 30 miles from my home but I won’t be attending.  I’ll be with them in spirit though.

Any thoughts on this?  Are you attending a Tea Party?  Will they send a message to our legislators and lead to reform, or is it all simply reactionary hype?:

Filed under: Government, Money by Michael