It’s that time of year again so here are some things to consider while you
gather all of your documentation in preparation for filing income tax forms with
the Internal Revenue Service:
Review your retirement plan with an eye to reducing taxable income. Contributing
the maximum allowed to an employer-sponsored retirement plan or an IRA of your own
will reduce your taxable income.
If you are receiving a sizable return, you may want to consider adjusting your payroll
withholding. The reduced withholding would shift the money otherwise received through
a refund once a year to an increase in monthly take-home pay. This may allow you
more flexibility in your budget or allow you to place the funds in savings (remember
your emergency account?) or investments as soon as it is earned rather than waiting
for Uncle Sam to return it to you a year later with no interest.
It’s that time of year again
so here are some things to
consider.
If you are receiving a return on your withholding, you may want to consider applying
the refund to one or more of your outstanding debts. Please contact one of our Client
Care credit counselors to review the balances and benefits received on each of your
accounts. This will allow you to make an informed choice as to which balance reduction
would most benefit your overall debt reduction plan.
If you find that your withholding did not cover your tax liability for the year
(you owe taxes), action must be taken. Review the last few years’ returns.
If you consistently under-withhold and owe additional funds at the end of the year
you should increase your withholding. Consistently under-withholding of taxes owed,
even if they are paid in full with the tax filing, can cause the Internal Revenue
Service to require you to pay the extra amount owed in quarterly installments throughout
the year.
If the amount you owe to the IRS is the result of a one-time event that is unlikely
to recur (inheritance, settlement, severance, etc.) adjustment may not be necessary.
Credit Advisors negotiates repayment plans with the IRS. If you cannot pay the total
amount owed, in full, at the time of filing, by all means complete your filing by
the April 15th deadline and pay as much as you can to the outstanding tax liability.
Fill out a form requesting that a repayment plan be arranged on the balance due
and include it with your filing. Contact a Client Care credit counselor to sign
the necessary releases and addendum so Credit Advisors may help you by adding the
debt to your debt management plan.
As always, you should consult a tax advisor before making any changes to your deduction/withholdings/tax
strategy. These suggestions are meant as a starting point for conversation and an
opportunity to pursue more information with your tax professional.