Monday, September 1, 2008

Preparing for tax season hit

This year I finished an old job and started a new one. There was a little overlap in pay cheques.

I took on a part time job. They did not take any taxes because as far as they are concerned I haven’t reached the minimum tax limit.

In addition, I’ve sold a few stocks which gained in value. Even though the rest are down, I do not realize a capital loss until I sell them. I could probably sell some this year to offset the capital gain. However, I don’t see it happening. Most of the stocks I bought for long term holdings. The few I sold, I only sold partials because they had gains which make them a bigger part of my portfolio than I wanted. Plus I’ve had dividends and interest payouts.

This means come tax season, I’m going to have some taxes to pay. I’m starting a Tax fund. Pre estimating how much taxes I will have to pay and setting that money aside marked – NOT TO BE SPENT!

Why am I doing this? Because once the money is in the Tax fund it is considered money gone. In a way I’m giving myself more time to accept this big hit emotionally. Secondly, when I was younger, Dad contributed to his company stock purchase plan – his only equity investment. Then one day things jumped and he sold a chunk of it to realize a big gain. Things were happy and rosy. It was my second year away at university and the year they bought a place in the city they lived.

However, come tax season, Dad did his taxes (on the last day) and realized he had to pay the government $10K for the gains he realized. $10K he did not have readily because they had put all their cash into down payment on the place. The whole family cleaned out our accounts to meet that payment. So for a month in university I had no money, mum and dad had no money, and Sis had no money. It was an uncomfortable month wondering if our pay would come in time to meet all the bills due dates. It was the closest I ever came to debt. I was brought up on the principle that no debt is good debt. My parents are even uncomfortable with big mortgages. Actually, they are even uncomfortable with the idea of no savings. I think their earlier days have a lot to do with that thinking, but that’s a whole other post. Point is if I can help it I don’t want to be caught unaware like Dad did that year.


Ginger said...

Hey Lady!

I just wanted to let you know I am awarding you the I *heart* Your Blog Award!

Thanks for writing a great blog!

Esme said...

Thanks Ginger!

I love reading your posts.