03 Apr Tax Planning: Why Do I Owe This Year?
Tax Planning Advice: Reasons You Owe Taxes and Ways You Can Reduce the Amount
When tax season comes around, people usually are annoyed by the burden of filing, but overall they’re happy that they’ll get some extra money. A tax return is always nice, but what if you file and find out that you actually owe money? That’s not so nice. But why do you owe this year? Is there anything you could have done to prevent it? Let’s look at the possible scenarios and how tax planning can prevent this from happening in the future.
Why Do I Owe Taxes?
Usually, the primary reason you owe taxes is that of what you put down on your W-4 form when you started your job. You can claim allowances on a W-4, and the more allowance you claim, the fewer taxes they take out of your paycheck each time. While this might sound nice because it’s extra money in your pocket each paycheck, this could easily lead to you owing money to the IRS come tax season.
Everyone is required to pay a certain amount of taxes each year, based on their situation. If you aren’t having enough taxes withheld from your paycheck, this could put you under the amount you’re supposed to pay. This will lead to you owing money instead of getting a refund. On the flip side, paying in more taxes than you need to gives you a refund. It’s usually that simple. With good tax planning, you can make sure this works in your favor.
How Do I Avoid Owing Next Year?
Just because you claim certain allowances at the start of your employment doesn’t mean you’re bound to them. You can change your W-4 at any time. Using some tax planning and a tax calculator can help you determine how much you need to have withheld from your paychecks in order to owe no money or get a refund.
Remember, while a refund is nice, it’s not necessarily the best case scenario. The best thing to do is to get as close as possible to owing zero. This way you don’t give more than you have to at each paycheck, and you don’t owe when it’s time to file taxes.
Tax Planning with Jeff Pickering, CPA
Tax planning isn’t the easiest thing to do on your own. Jeff Pickering, CPA can help. By going over your taxes, and filing them for you, we can give you the best chance of owing as little as possible or getting you the biggest refund. If you owed this year, we can help you with your tax planning for next year so it doesn’t happen again. For more information or to schedule an appointment, contact Jeff Pickering, CPA today.