Windfalls, Tax Returns, and Bonuses…. Oh, my!

Around the beginning of 2016 I was inspired to reduce my Federal Income Tax withholding to a point where our family would not get a return, and instead increase our weekly take home pay so that we could spend it more responsibly than we would with a huge windfall in February.

How did I do this? I looked at a tax table and calculated how much tax we would need to pay on 100% of our income.

tax-returns

I always always give a whole lot of wiggle room so I didn’t include the fact that some of our income was nontaxable: health dental and vision insurance, flex spending and 401(k) contributions were not taken in to account. I wasn’t aiming directly at a $0 refund (not brave enough) but I did significantly increase our take home pay by about $50 a week! I felt like I got a raise, it was great!

Then, my mom took me to bingo for my birthday in April. I’m an old lady at heart! Can you believe I won $6,200?! I firmly believe the reason that I won was because I looked at the jackpot and calculated how much money we would all get if I split it between myself, my mom, and a friend that came with us (it was also her birthday). Then I did win, and I promptly gave my mom $1,550, the friend $1,550, myself $1,550, and I opened up a 1 year CD for $1,550 to pay taxes on what I assumed the amount due would be. I cannot for the life of me remember what I used my $1,550 on but I searched my bank account and it looks like I paid a whole lot of bills on 4/8/2016. It looks like I was catching up?

Anywhosies, come April 2017 I will have another 1,550 windfall since we did our taxes and we are actually getting a small refund! We are going to use the refund to pay labor for the handyman to put in the new doors. The $1,550 I think I will hold on to a bit more for our auto insurance renewal which will be put on the auto pay credit card on 5/11. This way instead of knocking us on our butts again and taking a few months to recover we can continue with our debt pay off! Smart, no?

I hope if you are expecting a windfall that you are planning out the most responsible way to use yours as well!

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4 thoughts on “Windfalls, Tax Returns, and Bonuses…. Oh, my!

  1. Hey! Cool post! Last year my husband and I waited until the very last second to get our taxes done and we paid dearly for that mistake. Now we are on the straight and narrow path to financial responsibility and a positive net worth. 🙂

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  2. I keep using these tax calculators and they give me negative balances… which is impossible since we have paid SO MUCH this year + student loan interest + bought a new house. I can’t wait to get our taxes done. 🙂

    Like

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