Now that I’ve finally gotten my credit card balances down to zero, I’ve been trying to figure out the best use of the extra money I’ll have in my checking account. Options include: make extra car payments, put it in a savings account, put it in a mutual fund, make extra house payments, make impulse purchases, etc. In looking over the spreadsheets for our household finances, I saw one monthly bill that nags at me the most: $167 a month to the IRS.
Throughout 2007, I made a big mistake with my employer’s W-4 form, by answering it without reading the small print about having a working spouse. We were hit with a ~$6,000 tax bill the next year, and we didn’t have the cash to pay it. Our best option was to set up an installment plan with the IRS, to whom we’ve been paying $167 a month between then and now.
My wife and I have a perfectly logical, though surprisingly unusual, bill payment system which relies primarily on the difference between our salaries. We supply funds to our joint checking account according to what each of us can afford, instead of, for example, making 50/50 contributions, or assigning different utilities to each person. We’ve both been contributing to this annoying monthly IRS bill just like all the other monthly bills, but I feel more than 50% responsible for the fact that it got so messed up in the first place.
So I’ve decided to apply the leftover money in my account each month to the IRS bill from many years ago. Coincidentally, we just got a statement ending July 2010, and we still owe about $2,700. Depending on the month, I should be able to pay between $500 and $900 a month, so it should be taken care of quickly. Knowing what I do about how difficult it was to start paying them in the first place, I only hope they make it easy to pay them more than $167 a month.