I’ve been considering calling up our creditors to settle our debt. I’ve held off because I am afraid of how much it will negatively affect our credit scores, but I keep reading that credit scores should be the last thing on one’s mind when you’re as deep in debt as we are. Any personal experiences that can shed some light on this?

Remember my last post? The $7K that I owe? Turns out that my accountant was able to bring down what we owed for our federal taxes down to $1600 and increase our state refund to $2900. That means we are going to actually still have $1300 LEFT OVER. How he did it, I don’t know, and I don’t care. I would have been thankful finding out that we broke even, but the fact that we’re actually going to get a refund is icing on the cake.

How on earth did we end up thinking that we would owe $7K in the first place?

About a year ago, DH and I bought a house. Just a couple of months prior, we had a baby. So, I went to the IRS website and followed their instructions on how to calculate what to claim on the W-4. Taking into account the interest we would be paying on the house, the fact that we have a dependent, etc, I ended up claiming 4 for federal. I didn’t know one way or the other how that would truly affect how much we would be taking home each month.

A couple of months later, I got a new job and started making more than my husband. When I did the same calculations as instructed on the IRS website, I came up with zero. I didn’t think much of it; I claimed zero and sent my W-4 to HR. When I got my first paycheck, I didn’t understand why I was making only $300 more than my husband when annually I make $20K more. But I ignored the warning signs thinking that it was b/c our health insurance came from my salary, not his. Big mistake.

Imagine opening a W-2 in January, seeing how much DH took home and seeing how much he paid in taxes: $700. WHAT?! Only $700 of federal taxes were taken out for 8 months of working there? I was sweating bullets. Nonetheless, our accountant said to give him a weekend to look everything over and then he’d get back to me.

Long story short, he worked his magic; thankfully even though I used the SAME IRS instructions for calculating W-4 exemptions, I came up with zero. So that, along with our mortgage, donations, our dependent, and babysitting fees probably were able to compensate for my stupidity.

Moral of the story: always claim ZERO or ONE on your W-4 — better to get a refund at the end of the year than to get a few extra dollars every month and end up paying at the end of the year.

Got my taxes done and found out that I messed up on our W-4 exemptions. Big time. Basically we owe $7K. How in the world am I going to be able to come up with this by April 15?