It’s tax season! You have 1 week to complete your taxes if you haven’t done so already. Some people love tax season because they know a refund is in their future. Others are dreading it because they always owe. The best way to successfully maneuver through tax time is to have a plan. Here are some suggestions whether you face either scenario.
Let’s talk worst case scenario first. If you owe the government here are some things you can do to recover well…
- If you don’t have all of the money right now, the government does take payments. So don’t be afraid to file if that is the case. Just be honest about what your budget says you can afford and do your best to pay it off by April of 2013. We don’t want this to linger very long.
- Estimate your withholdings with the “withholding calculator” at www.irs.gov. Then go to your payroll department and change your exemptions so enough money is getting taken out of each check. It is best to plan ahead than find out you will owe again!
- Review your budget. Make adjustments to your budget because now you need to live on less. Find out what is unnecessary and reduce it or cut it out entirely. Be sure your budget balances with the change in exemptions and/or your monthly payment to Uncle Sam.
If you always get a refund here are some suggestions to make the most of your money…
- Put some money in savings! If you don’t have $1,000 in savings then you need to make that 1st on your list of to dos.
- Pay off some debt! List your debts smallest balance to largest balance and see how many you can pay off within your refund amount.
- Set aside money for any upcoming expenses (car repairs, non-monthly bills, etc).
- Have some fun! Yes I said it! Go out to dinner, take your kids to the museum, or buy something pretty for your home. Of course, I don’t want you to spend all of the refund on fun but a little fun makes you feel like you got something extra.
- The best way to handle a refund though is to actually get it in your paycheck throughout the year. If you received $2,400 from the government, I think it is better to get $200 more each month instead. Go to www.irs.gov and estimate your withholdings with the “withholding calculator”. Then change your exemptions with your payroll department so you just break even. Imagine having more money each month to pay down debt, save, or simply have fun!
Whether you have a refund or not I hope these tips will help you to be a better steward over your taxes this season. Making smart decisions with your taxes can have a positive impact on your future.