1099's and Interest income

brij2006 · January 2014

I have a few questions in regard to some income we are going to be taxed on this tax return. We cashed out my savings bonds, and the interest we will need to claim is $800. Then I also get 1099'd on my commissions and bonus money. So likely an extra $10k in income that I will then have to claim and pay taxes on. However, I do have some deductions that I can claim to help eleviate some of that.

So here's my question. We're doing Dave Ramsey's TMM, and have the money put together to put toward our debt snowball (minus the $1k). Would you wait to make that lump sum payment toward the debts until we know exactly whether or not we will owe on our taxes? We both claim zero and have the maximum amount taken out because this extra income is a usual thing, and we also use our tax return to pay for our property taxes in the summer.

My H is saying to just dump the amount we have in savings toward the debt, and if we have to come up with a few hundred dollars to make up the difference for our property taxes, then we have a few months to do so (it wouldn't be an issue to come up with the money, but would take away from the snowball). What would MM do? Leave the money there till after we file taxes (likely in February), or just put the money toward the debt and come up with the difference if we need to.

FWIW, my deductions will have me only paying taxes on about $4k of the $10k in income.

smbenevides1989 · January 2014

Personally, I would pay wait to pay it until February. I would rather pay off what I owe right away just so I don't have it sitting. This way you can make sure its not a surprise if the amount owed is larger than you expected.

hoffse · January 2014

I would save it until you see what you actually owe in taxes. It may be more than a few hundred dollars, and you don't want to be stuck with a tax bill.