If you had changed your withholdings last year to increase your take home pay, because of tax savings, you may need to change them again for the new tax year! We will be glad to review this with you at your annual review. Remember, that the goal of proper tax planning is to set your withholdings so you owe nothing, and get back nothing, when you file your return!
Why? Because in general, you must have 90% of your current taxes paid in when you file, or have 100-110% of the past year’s taxes paid in to avoid being penalized.
And, you never want to get back a refund, because that will mean you did something, well, something horrible:
Loaning money interest free to the IRS. Ouch!
It hurts my word processor to get those nasty words on paper. I don’t mind if you loan money to your “brother-in-law”, or to a friend, interest free, because some good may come from it.
But the IRS? Loaning them money without getting interest is ghastly. You deserve all your hard earned money to earn interest, or something. You work too hard to give them anything they aren’t entitled to by law. Since they aren’t entitled to over withholding, don’t give it to them!
The key is to prepare a tax plan for the current year, see how much you’re likely to owe for the year…and adjust your withholdings so you pay in between 90-100% of the total taxes by the end of the year!
If you’re not sure what to do, we’ll help you figure out what your withholdings should be set at so you pay in no more than you owe…and don’t make the awful mistake of loaning money to the IRS interest free!
Oh yeah, I forgot to mention that some company payroll offices think you are committing an act of treason if you change your withholdings to anything above “Married – 1”. They get all nervous, and tell you all sorts of incorrect information about how the IRS will confiscate your home if you don’t over pay.
Don’t listen to them. You are required to do some filings of an additional form if you claim over 10 exemptions, but that’s it. As long as you’re justified, your human resources office can’t say squat (anything). So, if you run into an evil payroll situation, let us know, and we’ll help you get it straightened out. (As well as help you with the forms, if necessary.)
Please keep in mind that this tip is designed to be of help for you, but is not to be relied upon as advice. It is merely a reminder that there are many choices you have available to you, and that planning is the only way to find the right answers for your situation! As with any financial issues, make sure you get the right information before making a decision! If you have any questions, we’ll be glad to help you!