So, you owe the IRS. Bummer. Here’s how to plan better for next year
While all your friends are posting on Facebook about what they plan to do with their tax returns, you’re scrambling to figure out how you’e going to drum up the money you owe in taxes.
Paying taxes can be a bummer, especially if you are short on cash or unprepared. Here’s what you can do to plan accordingly for next year.
Make sure you are withholding the correct amount from your W-4
Check your W-4 form or your withholding exemption form to make sure you are withholding the correct amount, according to Paul F. McGee, CPA and professor in the Accounting and Finance Department at Salem State University.
While the form may look like another language, you don’t need to worry about reading it too closely, just make sure you are withholding 0 instead of 1 or another number, according to McGee.
“If you owe money this year probably because you withholdings aren’t enough, so if you go to 0 should take care of that problem,” McGee said. “Even if you are married, there is a box on W-4 that says married, withhold at single rate and make that 0.”
And if you are beating yourself up over not getting a tax return, don’t be, according to Sam Handwerger, CPA and full-time lecturer at the University of Maryland, Robert H. Smith School of Business.
A tax return just means that someone overpaid the IRS and ultimately gave the government an interest-free loan.
“Just because you owe money to the IRS doesn’t mean you haven’t taken advantage of all your savings tax techniques,” Handwerger said.
Confused about your W-4? You can also use the IRS Withholding Calculator to figure out how to fill a new W-4.
If you’re a freelancer, you will probably make this mistake only once
Freelancers may get hit with a double whammy during tax season, unless they plan ahead.
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