I said I'd be honest, right?
Most people don't want to give up enough extra income to make a difference in the taxes they pay, but it is true - if you make less money, you pay fewer taxes, too. If you follow our model - "want less, spend less, earn less and live more" - then you might find yourself the recipient of some of the "benefits" of being "poor".
We have worked hard to cut down our bills and expenses, and the choices we've made around work - self-employment, working from home, etc. - makes it much more likely that we'll earn modest incomes rather than superstar ones. Don't get me wrong, I'd love to publish a best-selling novel, and my husband wouldn't shy away from writing a best-selling game, but so far we haven't launched ourselves into the kind of earnings that get you on the front of Money magazine.
What I've learned over the years is that the vagaries of the tax code mean that one year you might earn just enough to get all kinds of tax breaks or even payments from the government (Earned Income Credit in the US or Child Tax Credits in Canada), and the next year you might earn a tiny bit more and have all your "gain" wiped out by a corresponding "loss" of those benefits you received the year before.
There's nothing you can do about it, except to be aware it's coming. When you live frugally you have to know all the numbers; you simply can't live by the seat of your pants.
I'm in the middle of sorting out my taxes right now. I don't hire an accountant - I do it myself, because it saves money ($100 an hour or more!) and because I find even the best accountants make mistakes. Doing the taxes myself allows me to become familiar with the tax code so that I know the kinds of things I can do the following year to set our businesses up in the best possible way.
How are you holding up this tax season?