We all have regrets — money regrets, that is. But, like all mistakes, we wouldn't be who — or where — we are today without them. In our "Money Fails" series, real people share how they bounced back from financial slip-ups, and what they learned along the way.
Here, one writer shares how a lax approach to her taxes led to a surprise bill from the IRS.
It was a snowy January afternoon when I opened my mailbox and found a letter from the IRS. As someone raised in a house with occasional tax troubles, I knew that this type of letter usually brought bad news. This particular one informed me (in complicated verbiage) that my husband and I owed about $2,000 in taxes.
There’s never a good time to get an unexpected bill for thousands of dollars, but this was especially terrible timing: My husband and I were two weeks from closing on our first home, and couldn’t afford any trouble — or any payments. I felt totally helpless as I imagined our dream of homeownership slipping away.

How We Got Here

I’ve always done my own taxes, even through years of dabbling in freelance writing, and I'd never had a problem. Until I started making serious money.
For the tax year in question, I made five figures and had sent a check to the government in April for a few hundred dollars — what I thought I owed. Then I continued to grow my business, bringing in even more income.
But I didn't follow industry advice and set aside 20% of my income for the next tax bill. There was just always something more pressing to do with those funds.
So by January, I was already beginning to worry about how much I'd need to pay. When I was holding proof that I owed an additional $2,000 from the year before, I felt overwhelmed and silly for not saving.

Making a Plan

I met with a tax professional, who discovered an incorrect 1099 tax form from a client had caused me to miscalculate. I set up a payment plan with the IRS incorporating the back taxes and my balance for the current year, which brought our total owed to about $4,000.
Luckily, to start the payment plan we were only required to pay a small percentage up front, so our homebuying plans weren't derailed. We successfully closed on our house and we haven't had any tax issues since (knock on wood). Here's what I learned throughout the process.
1. The IRS really isn’t that scary. Lots of Americans fear the IRS, which isn't all that surprising since they can garner wages and seize assets with more freedom than most creditors.
However, these are extreme solutions. My tax letter came with simple options: Accept the agency’s findings and pay what I owed or provide proof that my numbers were correct. As the tax professional told me, the IRS wants the money you owe, but they’re not out to cause you unnecessary strife to get it.
2. Don't panic. In my mind, tax debt meant big consequences, but the reality was much more tame. My husband and I just needed to file a form 9465 to request an installment agreement (something my parents explained to me, having done it themselves in the past). The IRS even asked us how much we could pay each month and set that as the payment amount.
3. Pay taxes quarterly. Freelancers don't have employers withholding taxes from our paychecks like traditional, full-time employees do. To avoid one giant payment, it's usually a good idea to pay quarterly estimated taxes — and if you expect to owe more than $1,000 in taxes for the year, you’re required to make quarterly payments.
When I first started freelancing, I wasn't paying quarterly because my husband and I filed jointly and his refund usually cancelled out what I owed. Now, though, I make sure to set money aside for my quarterly payments.
4. A change of mindset goes a long way. Giving the IRS a chunk of my hard-earned income is irritating, but I needed to come to terms with it. Now, I look at my ever-increasing tax payments as a sign that my business is growing, and I also give myself kudos for (finally) learning to save ahead of time.
Today, there are no more thick letters or tax panic for me. My husband and I still make installment payments on that debt (we're taking a pretty slow approach to focus on our higher-interest debts first), but we have kept current with quarterly payments for the two years since. Overall, that makes us much less stressed leading up to April 15.