2022 Taxes Part Two

I just hit send on our 2022 return this week and paid over $10K in extra federal income tax! I wished I could blame the government or a foreign power on my underpayment, but I know the fault lies with me. Don’t get me wrong, I don’t love paying taxes and wouldn’t mind if taxes somehow just disappeared. But I am a realist and of the “give unto Caesar what is Caesar’s” mind. Death and taxes are our only two guarantees in life!

What’s worse, this isn’t the first time in the past three tax years I’ve screwed it up! I’ve lamented previously about how this one particular area of my life since leaving a military career has proven difficult. Bottom line, career Soldiers are sheltered from the burden that is federal income tax. I realize now how truly uneducated I was. Making matters more difficult, seems like there is a new variable added every year since becoming a civilian again. Year before last I changed employers. Last year our oldest turned 18, this year we are selling one of our real estate assets. I suppose the silver lining is I’m learning something new every year about taxes!  

I shared details earlier this year when I discovered my 2022 errors resulting in a large underpayment. I’ll summarize briefly- my employer withholding was much less than in previous years, I forgot I had an 18-year-old and we had a great year in the rental business. We have done our own taxes for the past 20+ years using the premium edition of a popular tax software.

Despite my struggles over the past few years, I have no plans to stop self-preparing our return. I am a chronic do it yourselfer and am not yet ready to give up and call an accountant. I’ve already implemented fixes for tax year 2023 to include extra withhold from my employer, quarterly 2023 estimated tax payments and increasing charitable giving.

I’m not bitter at the government, only at myself for making mistakes while estimating my taxes. However, this episode does bring to light a very distressing fact about the US income tax system.  My wife who hails from South Korea but has been an American citizen for over 20 years remains completely confounded by our tax system. Earlier this year when I explained to her, we owed the government over $10k in additional 2022 taxes, her first response was to ask “who told you this, the government?”

When I explained to her that in America, we determine our own tax burden and it is on the individual to get right with the IRS, she sat in disbelief. She asked, “what if you made a mistake or what if you just didn’t pay?”. When I told her unless audited or reported by someone, it’s possible the IRS may never discover an error, she was almost in shock.

I’m pretty sure our tax system is bass ackwards from how most countries do it. It certainly is different than my wife’s native South Korea. There the government keeps close tabs on personal income and sends you a bill. I’m sure most foreigners would have a hard time getting their head wrapped around the American way of federal income taxes.

Although I’m a “give unto Caesar” type of guy, and will dutifully continue to send in my required payments on time, our 2022 return has certainly caused me to think. While I’m trying to do the right thing and get square on my tax bill, how many Americans choose not too despite the possible consequences? Perhaps for the new or immigrant worker, maybe they just don’t understand how it works? How often do taxpayers make unintentional mistakes on their return disadvantageous to themselves or even the government?

Any system with this much slop built-in can’t be effective for the taxpayer or the government. But I suppose it’s the tax system we have. I’ll continue to try to get it right and pay what I owe. For now, I’m just hoping to get better at estimating our 2023 taxes!

Interested in rental property investing? Look for “Collect Rent, Don’t Pay It: A Beginner’s Guide to Rental Property Investing” on Amazon to learn how our family turned rental property investing into a successful side hustle!

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The commentary provided in this blog is for informational purposes only and is not intended to be a source of financial or investing advice.

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