When does getting a check for $4K in the mail suck?

When you get it because your 401K plan has failed the IRS' non-discrimination test and the amount is being refunded from your 401K contribution for 2012 and will increase your taxable income in 2013!!! Boo. Sooooooooooooooooo annoying.

I do everything right to save for retirement and the government penalizes me at every turn -- my IRA contribution (which I max out every year) is not deductible. Now my only tax advantaged account which I am legally allowed to contribute $17,500 to (or whatever the # is) is reduced by several thousand dollars -- more than 20% of my contribution returned!!! I think the government should encourage everyone to save, and if "high income" savers save more they shouldn't be penalized. In reality, the government probably does not do this because they care about encouraging lower income savers, but because they want to get their hands on as much income as possible from high-income earners so they can tax it.  Ugh. Well, I'm just going to have to save more in my taxable account and spend less to make up for the government's constant blocking of my attempts to save in tax-advantaged accounts.

Update

Wow, this last month has been really crazy. Both financially and otherwise.

First, the IRS audit. My business expense was rejected by the auditor. I found a great, relevant tax course case, and my accountant encouraged me to fight the finding, through the proper channels. This would mean talking to the agent, then his supervisor and if I didn't get anywhere, filing an appeal and then meeting with an agent in person. All of this would have meant I had to write up my findings and basically act as my own lawyer/rep. I was ready. And then life happened. And I realized I had already spent a lot of time on this audit and that my resources would be better spent elsewhere. So I gave up. I paid the $2K to make it go away. Of course I'm not done. I'll probably have to re-file NY taxes for that year, too. In the end, I'm glad that it's over and I do not have to think about this anymore. Also, the IRS agent I spoke to was SOOOO nice. I hated him (of course) until I spoke to him. He actually encouraged me to provide him with the case I had found, but I just kept telling him I did not have time. I think he even offered me an extension.

Second, the market. I have no idea. One day I am poor, the next I'm back up to where I started. All of this up and down just means that I net out about even from what I can tell, not really making or losing money.

Third, job. I've decided that I am very bored at my job. I am getting pretty far along interviewing for a new one, so we'll see.

Fourth, it's that time of year. With any luck by the end of this month I will be in possession of a bonus check. Considering how lean but successful we were this year everyone is expecting a bigger one than last year, so we'll see. Crossing fingers.

Audit Results

So today I came home to another fat package from the IRS (why so many papers always from them?). This one I was eagerly anticipating. It was their response to my response to their totally ridiculous audit. The main point of their audit was totally unfounded, which was validated by the fact that in their response to me they did not even MENTION the initial reason why they supposedly audited me and just focused on my business expense deduction which they did not allow. They also assessed a penalty of 20% and charged back interest. Overall, it was about 2K additional tax. At this point I am so over it and am just going to pay the stupid 2K and move on. One would hope they would be over it at this point too, but they also included a handy little form asking me to extend the statue of limitations on the tax year in question which should expire April 1 until June 30th. I don't plan on signing this, but I'm consulting my accountant on the question.

The only redeeming factor to this whole nightmare was that I uncovered a mistake in my favor, which lessened the amount of additional tax that I have to pay.

More Ugh

I have been having a bit of a pity party for the last week, ever since I came home to a big fat package from the IRS saying that they were looking at my 2008 tax return. This is highly annoying because the reason they say they are looking at my return is absolutely ridiculous and totally does not apply to my situation (they think I have been paid by a foreign embassy). But, in the process I am now going to have to defend my deductions (it's really just one big one) and there is the chance that I could lose. In which case I could have to pay interest in addition to the tax owed, and who knows maybe even penalties for good measure. Not to mention the annoyance of having to gather all of the paperwork required for this. And consulting an accountant who is VERY expensive. This whole ordeal could cost me $5k or god forbid more. Which on top of the 15K or so I have lost in the market eats up a lot of my savings for I guess the last two quarters or so.

I feel so wronged by the financial gods. I save, I invest, I plan and then the market dives, the banks don't pay any interest and now the IRS is harping on me.

Well, if I do end up paying a big tax bill, I will simply have to scale back. I was contemplating another trip in November, so I'll kill that idea. I was also thinking about having a cosmetic procedure done (judge away, I don't mind -- it's non-invasive and totally unneccesary but I want it). You know -- that whole stimulating the economy thing. But if the IRS wants to claw back my $, then the US government will have to find another consumer to do some shopping.