I have been getting the shaft lately in terms of government taxes, fines, and penalties. Not that this should surprise anyone, considering my
history, but here are 3 recent things that I learned the hard way:
1. When given the choice to be an employee or contractor, be an employee.
I made only $13,000 last year, but somehow I owe $1,500 in taxes. This is because when my summer employer asked whether I wanted to added to the payroll or be paid as an independent contractor for my 10-week internship, I said, "I'll be a contractor." I knew there were tax implications, but I thought it was just a matter of timing. (ie. pay taxes now or pay them later, and it sounded good at the time to pay them later).
Sadly, I found out last week that I am now paying
more in taxes because of my decision to not be on the payroll. If I had chosen to be an employee, I would have paid income tax over the summer but would have gotten a nice little refund from education credits at tax time. Instead, I am now on the hook for my own SS and Medicare taxes, which my employer would have normally paid as part of the costs of having an employee.* Plus, about $50 in fines for not paying the taxes at the time that I earned the income. And no, education credits do
not count toward SS, Medicare, or late fines.
2. If you forget to hang up your residential parking permit on my street - a wide open street with plenty of parking on both the east and west sides pretty much at all times of day and night, mind you - you will get a ticket. For $47. And it might just blow away in the wind, and you might not even find out you got a ticket until you receive a late notice in the mail, say after returning from a nice trip to Japan.
3. If you park at a broken meter in Santa Monica on a Saturday morning, even if you try to put coins into the meter, and said meter fails to register your money, and you are fuming because you don't have enough change left to go to another meter and so you decide to just take a chance - you will get a ticket. Within a half hour. For $35.
* So that's why they said in business school that payroll costs are a big burden on employers. The lesson has finally penetrated my thick skull.