Knowing what you don’t know: tax edition

When I filed taxes for my first full year as a freelancer, I was audited by the state of Massachusetts. (It was a strange and rather anticlimactic experience. They sent me a letter asking for full documentation of my income and expenses–both of which were, admittedly, pretty low in year 1. I sent in my receipts and 1099s and waited. Several months later I noticed a small refund in my bank account, but I never heard from them again saying that my case had been resolved.)

Last year I ran into my accounting professor from Smith, Chuck Johnson. I re-introduced myself to him as his former student. I told him I owned my own business now and that I’d learned a lot from his class. His reply: “Well then you must know enough to have an accountant.” That was what he hoped he had taught me.

Fun fact: I minored in math at Smith and scored at the top of Chuck’s class my semester. But I’m no professional. The year after I got audited I finally got around to getting myself an accountant, but still it was months too late: I had to scramble to come up with thousands of dollars to pay my back taxes and make my first quarterly payment on time. Lesson learned (twice). My accountant whipped me into shape, figured out my quarterly estimates, and made sure I paid them on time. She made sure I knew how to meticulously document my expenses. Most of all she made sure I know what I don’t know.

When I finished my taxes yesterday, the amount due after quarterly payments was 3% of what it was last year. 3 percent. I sent off my first quarterly payment for 2015, too, and I’ve even got enough to spare to open up a new IRA account–with the help of a professional, of course.