IRS Audit Freedom Day
Fourth of July is one of my favorite holidays of the year! I love America, the great patriotic songs and the fireworks. This is a significant holiday – it is the celebration of our Independence from England. We fought against taxation without representation.
I can remember my trip to New England like it was yesterday even though it was many years ago. Following the marked Freedom Trail in Boston, I could feel the energy of Benjamin Franklin and our other great founders. I imagined Betsy Ross stitching our first flag with 13 stars representing our first 13 original states in a circular pattern. If you ever get a chance to go there, I hope you have as touching a time as I did.
I hate to tell you this, though. Did you know we are officially into the second half of our calendar year? It is summer and it is hot in Phoenix, Arizona. My mother was right, again. The older you get, the faster time flies.
What does this half-year point mean for you income-tax wise? If you are an individual taxpayer who files a 1040 Individual Income Tax Return, this is a great time to check on your income tax withholding. Are you having enough withheld? Will you just barely cover your tax? Will you get a refund? Are you going to owe the IRS come next April 15th?
Are you a good money saver? (I save a lot of other stuff.) Do you just naturally and automatically set aside money to cover those “down the road” expenses? If we just open our eyes, we know we have regular bills every week, like personal items and groceries. We have regular bills every month, like car payments and mortgage payments, We have regular bills every quarter, like car insurance and estimated tax payments if you are self-employed. We have regular bills twice a year, like real estate taxes if your taxes aren’t paid through your mortgage. And then we have those special once a year bills, like anniversary presents, birthday presents, Christmas and other holiday presents and the unexpected.
I don’t want to save for a rainy day… it might just rain. And if we save for the unexpected are we just inviting trouble? It sure is nice, though, to have that cushion of comfort a savings account can provide.
Are you one who lives paycheck-to-paycheck and needs to spend your whole paycheck on necessary living expenses?. Do you want to use your withholding as a savings account? Did you know you can do that? Some argue truthfully that the IRS does not pay you interest on the income taxes you withhold from your paycheck. But right now the banks don’t pay much interest either. If you know you’re going to owe the tax eventually, think about paying in a little each payday rather than be unhappily surprised with a big headache of a tax bill next April.
Here’s one other little secret that most people don’t know. The IRS keeps accurate tabs on the estimated tax payments a self-employed person deposits with the government. They know exactly when they receive your payments. If that estimated tax payment is late you can suffer interest and penalties. But , here’s the secret. Withholding is considered paid evenly throughout the year even if it is not withheld evenly during the year.
I never want you to have any “tax train wrecks”. It is not too late to get yourself back on track. Can I help you check to see if your withholding is on track?
To your lowest legal tax. Many Happy Return$,
Nellie Williams, EA