As the old saying goes, “April showers bring May flowers”. While this can be true regarding the weather, the “April showers” can be considered the tax filing deadline for individuals, which this year falls on April 17th. Normally if you owe Uncle Sam every year, you dread the thought. But now is also a good time to think about next year’s tax burden. You can do several things now in order to decrease the amount you might pay next year – and maybe even turn it into a refund.
One item you might want to address is the number of exemptions you list on your W-4 Form. If you claim two, three, or higher, you could cause your employer to fail withholding enough taxes from each paycheck. When it’s time to file your taxes each year, you end up having to make up this difference in one lump sum. By decreasing the number of exemptions on your W-4 now, you will allow more taxes withheld from each paycheck and not have such a high lump sum payment. You can even claim zero, which will allow the maximum amount of taxes to be withheld. Ask your employer for your original W-4 Form to review, and make any necessary changes.
Estimated tax payments can be troublesome to pay if you have royalty income such as gas or oil wells. Income from these sources may vary significantly from year to year, even into the tens of thousands of dollars. This could cause the following year estimated payments to be much higher than necessary, when your income may have decreased. In this case, calculating your tax each quarter could save you from the stress of making excessive tax payments.
If you’re expecting or received a refund, congratulations! But how have you used your refund? Did you invest it in stocks or bonds, pay off Christmas credit card bills, or pay down the principle on loans you have? Using your refund wisely can save you from paying additional interest on loans, credit cards, and your mortgage.
While “Tax Day” can be the ultimate April shower, these simple tips might help bring more May flowers to your finances.
The Mobile CPA
http://www.themobilecpa.net
