Almost done with my taxes

My accountant emailed me on Tuesday that my tax return was ready. I opted to have her mail it to me via snail mail since I don't need to get it until Tuesday. The good news is that I was way over on my Fed taxes, so I will get a hefty "refund", but since I have back taxes, that "refund" stays right where it is at the IRS and I simply see the amount of my back taxes shrink by almost 10%. The bad news is that I still owe Colorado $9, but that's bad news that I can live with.

I'm starting to toy with the idea of actually paying off all of those back taxes by the end of the year. By then, I will have paid them down by another 25%, have a higher credit limit on my new credit cards to be able to cover and near-term "rainy-day" expenses, accumulated a sizable pot of assets in both my retirement plan and my employee stock purchase plan (ESPP), been at my new job long enough to start feeling secure and have gone through a full, annual review cycle and possibly gotten a modest raise, and simply feel comfortable enough that I could get by with a mere six months of rainy-day contingency fund in exchange for having a nice increase in short-term cash flow that can go into my retirement plan or simply go back into rebuilding the rainy day fund up to a full year within 18 months. I'm not quite convinced it's the right thing to do, but at least it's beginnning to look like an option I can realistically consider, and it would get me completely out of "the hole." Besides, I have eight months to think about it.

In any case, I absolutely won't go below six months of rainy-day fund to pay off those back taxes. An alternative idea is to actually stretch out payment of the back taxes in order to build up an even fatter rainy-day fund. We'll see how I feel about "the future" in six months. I'm sure a lot will change between now and then.

-- Jack Krupansky