How To Avoid Owing Too Much in Taxes Plus Big Tax Refunds

How To Avoid Owing Too Much in Taxes Plus Big Tax Refunds
How To Avoid Owing Too Much in Taxes Plus Big Tax Refunds

Introduction Of How To Avoid Owing Too Much in Taxes Plus Big Tax Refunds

How To Avoid Owing Too Much in Taxes Plus Big Tax Refunds. This idea came to me from my brother-in-law who was trying to maximize his paycheck without paying too much or too little in taxes so really when you think about getting a tax refund all that means is throughout the year you have had too much tax withheld from your paycheck and so you’ve overpaid in taxes and then at the end of the year when you file your tax return and you get that tax refund back in April it just means.

That you spent too much money on taxes

That you spent too much money on taxes and nobody wants to do that’s like you if you went and physically went to your government’s office let’s say that there was a state-building and a federal building that you had to physically go into and write a check for your taxes you would think twice about how much that amount would be but a lot of times people just don’t even look at their pay stub and kind of forget that all this money is being taken out so let’s talk about ways that we can avoid this situation all right.

So the first thing that you want to do is you want to head over to the irs.gov website and you’re going to be using the tax withholding estimator I’m going to link this in the description box below so that you can use this for yourself a couple of things that you will want to have on hand before you start the withholding tax estimator is you want to have last year’s tax return and your spouse’s tax return if you guys are filing your taxes together and you’ll want to have a w-4 form if you are ready to make changes

Now generally speaking you can change your withholding amounts using a w-4 form with your employer throughout the year so check with human resources to make sure that that’s an option for you so that you can make changes after you go through this estimator so let’s check it out alright so when I was going through this for me and my husband it was a little tricky for me because I’m self-employed and my husband is a w-2 income earner so I think this tool does work best for those who earn a w-2 but.

Self-employed income

If you have self-employed income there is a way to do that within this estimator it just wasn’t as straightforward as I wanted it to be so let’s check it out the first thing that you’re going to do is kind of go through the filing status if you have any dependents and I felt like this part of the estimator was pretty straightforward and then until I got to the earned net income from spouse’s self-employment and I ended up doing this I was kind of filling this out with kyle in mind and then I added in my income next thing.

What you’ll want to do is you’ll want to do your income and withholding and then figure out how frequently you are paid and then using the last pay stub that you have enter in the amounts that you see on your pay stub that’s why it’s really important to have your last year’s tax return so you can kind of base the information off of last year make sure you are also inputting any retirement 401k contributions and if you have a health saving account that you are entering in that information as well.

Whatever you see on the withholding estimator enter in as much information as possible next you’re going to have any adjustments to income I did have some adjustments based on my self-employed status and that I contribute to a sep ira if you had other deductions here you could add it as well but a lot of times this portion may not apply to you so you can either click see adjustments or go to next step next you’re going to do deductions from the income you can either itemize or take the standard most people will fall within.

The standard deduction category

The standard deduction category and that’s what I chose and then I went through two tax credits I typically don’t have any really tax credits to think of so I just did get my results without tax credits so on my results page you actually when you are thinking about taxes you want to make sure that you don’t owe too much or that you don’t get too much of a refund so really if you can get as close to zero as possible that’s a balanced tax return and that means you’re paying just the right amount of taxes.

So you can see from my results and keep in mind I kind of had to play with the numbers because of my self-employment status but if it’s just you as a w-2 income earner or both you and your partner w-2 income earners I feel like this tool will be easiest for you to figure out and you can see that I have an 885 balance in which I might owe at the end of the year so I feel like that’s good and it seems like there would be ways that we could avoid owing a balance by scrolling down below and it looks like that.

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We would just have to adjust our withholding so that we are paying a little bit more in taxes than what we currently have so the withholding estimator I feel like is actually a pretty great tool that the IRS is supplying but I would also talk to your CPA or an accountant that you know that could help you with your situation so that you make sure that what you’re seeing on this estimator is valid by having a live person take a look at your tax return and your forms to make sure that everything is good.

That information then you can go ahead and make those changes

Once you get that information then you can go ahead and make those changes on that w-4 form which I will link to below and then you can file that with your human resources department and make those changes now if you are on the opposite side of the camp in which you frequently owe money or you’ve fallen into a situation this year in which this is the first time you’ve ever owed money there are a couple of reasons for that one more unemployment income happened due to the pandemic and if.

You didn’t have any taxes withheld from your unemployment checks or you didn’t set aside money from the unemployment income in a separate saving account for tax purposes then you’re left with a big tax bill at the end of the year so that could be a reason why you owe money this year the second reason is perhaps you had some more side hustle income that you’ve reported on your tax return and you’ll have to pay money on any side hustle income that you’ve earned throughout the past year.

The third thing is because of the student loan freeze on any federal student loans so there was a freeze on payments and interest last year and it’s continuing throughout this past year you’re probably not going to see any student loan interest deductions and that’s typically a form that you receive so that you can deduct student loan interest. Comment It How To Avoid Owing Too Much in Taxes Plus Big Tax Refunds.