Make sure to do your taxes early this year

I have been getting reports from some of my friends on the internet regarding larger than normal tax bills this year. This is due to a change in the tax code last year. In order to avoid a surprise in April, I suggest that you get your taxes done early this year. Here’s why:

In 2009, the Congress passed and the President signed the American Recovery and Reinvestment Act. In addition to other provisions, this act contained a provision called the Making Work Pay tax credit. This credit changed the withholding tables for working Americans to allow for a $400 per person ($800 if you are married) tax credit. Instead of mailing everyone checks, this credit gave everyone a bit more money in each paycheck. When people do their taxes this year, they may see some problems with this change in the withholding tables.

If you make more than $75,000 or $150,000 married, you don’t qualify for the credit and therefore must pay it back.

If you worked more than one job, you may have had too much taken out of your paychecks since the credit is $400 per person, not per job.

If you work a part-time job and are also on Social Security, you would have received a check for $250 last year, plus had the extra money withheld from your check, but the maximum credit is $400 so you might owe as well.

Make sure that when filing your taxes, you complete the new Schedule M or you won’t get any credit for the tax credit.

If you are penalized for underpayment of taxes, you can appeal based on the Making Work Pay credit. According to the IRS, they will waive penalties related to this credit.

I urge you to get your taxes done early this year so that you can plan in case you do end up owing. Also, do not go out and make a big purchase because you think you are going to get a large refund this year. Wait until you have your refund in hand before spending it.

Please feel free to post questions here or email me at kristin at klingtocash dot com.

Taxes due tomorrow!

Just a reminder that your individual tax return is due tomorrow. If you need more time to file you can file form 4868. Here’s the catch: an extension does not give you additional time to pay. It only gives you additional time to file. If you think you owe taxes, this extension is not going to help you.

If you need more time to pay, there are a lot of options out there. The IRS have a special page set up with all the information you need. Make sure you act if you owe money. Do not wait for the IRS to track you down. By asking for an installment agreement, you can cut your penalties and move toward paying off your debt.

Are your taxes filed? I’ll be submitting mine tomorrow. As a CPA, mine are always the last to be filed.

Are you giving the IRS an interest free loan?

How is it already February 8? I feel like I just wrote an entry two days ago. Well, I want to thank everyone who sent suggestions for blog topics. I got lots of suggestions from clients, friends and through my email. The winner of the Kill-a-Watt energy monitor is Amy from CT. Congrats Amy. I’ll get it out to you ASAP.

On to more important matters. Now, I try not to get huffy on the blog but I think tonight I have to rant a bit. It’s tax time so not only am I preparing tax returns for my clients but a lot of people talk taxes with me. Friends, family, acquaintances, you name it. People talk money with me in general. It’s the nature of the profession. I know there are a lot of people out there who are struggling to pay their bills each month and are racking up credit card debt. Then there same people are getting THOUSANDS of dollars back in tax refunds. Are you kidding? Seriously? Why are you giving the IRS an interest free loan?