'Tis the Season
The Budget Doctor's Rules for Taxes
When the holiday decorations are put away and the kids are back in school, it is tax season. On or about April 15 it will be necessary to communicate with the IRS if you are an income earning American. Some people expect a refund and they are more likely to rush to file as soon as they receive all the necessary information. Other people expect to pay and they are likely to wait until the last week. Still other people simply like to do everything at the last minute and they will line up at the Post Office on the last day.
It doesn't really make a lot of difference when you file, but Please note the rules are not laws and this article does not constitute tax advice. Every good American should make a donation each year to a lawyer or CPA for tax advice but it is also good to use a little common sense and think about the rules.
And remember that it is always good to pay the taxes you owe. Any advice you get, or rules you see that suggest not filing or not paying taxes, should be pondered very carefully. It might even be wise to pay someone else for a second opinion.
The Budget Doctor's Non-Tax Advice Rules for Taxes
- Prepare your taxes now
If you owe, you may need time to save the money. If the IRS owes you, you want to get your cash as soon as possible. You are supposed to have all tax related information sent to you by the end of January, so why wait? Of course if you owe you should not actually file and pay until April 15.
- Use software and do your own taxes.
If you trust the on line services with all your financial information you may be able to file your taxes for free. Go to IRS.gov for information concerning online tax preparers. If you are not trusting, buy one of the brand-name packages anywhere they sell software. If you get into the program and find that your taxes are too complicated, you can still hire a CPA if it is early enough. If you can't afford professional help, check with the IRS to find a VITA site where you can get free help preparing your taxes Use software and do your own taxes.
- Consider every legal way of reducing your taxes.
Do you understand the Earned Income Credit? Do you know about education Consider every legal way of reducing your taxes. deductions? There are many ways to reduce your tax bill and you must be certain you (or your tax preparer) have considered every one. If you pay $40 to get your taxes prepared at a folding table in a discount store you may be missing some opportunities and taking some risk. And speaking of risk;
- Make sure you have every document.
There are tax implications for almost every financial transaction. Did you buy a house? Did you settle a debt for less than you owed? Did you get a large gift or win a prize? Search your files and your memory to make sure you do not forget something. The penalties for tax evasion are too serious to mention here but they may involve pointed devices and an adjustment to your living conditions.
- Adjust your withholding if you had to pay $50 or more or had a refund of $50 or more.
As soon as you know that you had too much or too little withheld from your check, make the adjustment. Go to your payroll office and fill out a new withholding form. If you are getting back $260 and get paid every two weeks, you are having $10 too much withheld each pay. Increase your take home pay by $9 and save it for emergencies. If you must send a payment, have more withheld. If you pay too much you are giving the government an interest free loan. If you pay too little the government might penalize you.
Taxes are a fact of life and we all know about death and taxes as the inevitable parts of life. You do not have to enjoy dying or filing taxes but you do have to do both. Some folks consider funny ways to let the IRS know how much they dislike paying taxes but "funny" and "IRS" go together like "laughter" and "puncture wound."