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Tax Time
By Daphne | April 14, 2008
Tomorrow is the last day to file your taxes. Also remember that you need to file your taxes in order to get your economic stimulus check.
After you file your taxes this year, this may be a great time to reassess your tax situation. If you have had to pay more taxes because of increased earnings from wages or successful investments then you may want to have more money deducted from your taxes throughout the year so that you will not have to worry about paying a large lump sum later in the year.
Many advisors will say that you shouldn’t give the government a free loan during the year. If you are expecting a large tax return, basically you have overpaid your taxes throughout the year. This may seem like a good idea to decrease the amount that is withheld from your check so that you have more money to spend. But… let’s say that your investment in widgets was much more successful that you thought and since this is stock that you directly own, or own through a mutual fund, you will have to pay tax on the earnings. You may have to pay tax if you have too little withheld from your paycheck for outside earnings. Even if you cash in the savings bond that you received as a kid for your birthday or from elementary school graduation, you have to pay tax on those earnings.
If you are someone who does not have a lot of money in savings to easily write the IRS a check for $2000 or more, having a little extra taken out of your check would be better than stressing about where you will get the money that you need to send to pay your tax debt.
By changing your status on your withholding tax, you may still get a refund if your current deductions do not change. If your income increases by $10,000 or so, if you change jobs, you may enter a new tax bracket. Check this before you make any changes, otherwise you may make a change for the worse.
Topics: April 2008 |