Don’t Overpay Your Taxes

Pay your fair share of taxes and not more.You should be a responsible adult,pull your weight and not shirk your responsibilities. But why overpay your taxes?

There can be a number of reasons or rationalizations.First a person may want to stay on the right side of the IRS.Why draw concern and attention.So what if I overpay a bit of taxes.At least I will sleep soundly at night.First of all it is highly unlikely that you are going to receive any due consideration or appreciation from the I.R.S. when trouble comes your way.Best not to stay up late waiting for the congratulatory letter from the I.R.S. It’s analogous to the bank who called in a customer for a late payment.The customer asked how much owed – the banker answered $ 1000.The customer reminded the banker (to no avail) that the previous month he had a balance of $ 10,000 in the bank and lost no sleep over it.The banker was not impressed with the debate and arguments made and demanded payment all the same.

If you shop at Wal-Mart do you pay $ 15 for an item that is charged at $ 10? The same holds true when paying taxes. You may say that it is a forced saving.It may well be true that if the money was not held in trust by the IRS you would have no money saved.However two points first the fact that you are reading this article testifies that you have an interest in not paying extra money for taxes and as well wish to keep or hold onto to more of your money rather than giving it away.In addition at least a bank will give you some interest whereas the IRS will not give you a nickel of interest or consideration even though they held onto your money unnecessarily! If it is a large sum of money the interest rate can be considerable.In addition if the money is held in a banking account this can directly influence your credit record in a positive way.It is highly unlikely that the IRS will file a report to the banking and credit industry counting up your tax overpayment as a positive note to add to your credit rating.Actually if any financial expert examined your tax payment surplus position they might deduce that you do not manage your money and finances well.

It’s a good idea to hire someone to help you with the tracking and calculations of tax due.A bookkeeper can help you keep track of income and expenses on a monthly basis.An accountant can help you complete your tax returns.Even if you are an employee who receives a W-2 at the end of the year,keeping track of your expenses can prove to be highly effective.In addition to deducting interest on your mortgage, there are tax deductions for medical costs and even transportation to and from medical appointments! A professional can help you find all the deductions right for you!

If you want to save money for the future then save money in a standard old fashioned tried and tested way.Simply deposit a regular amount into a saving account at your bank or credit union.Alternatively you can “pay yourself first”.Have your bank or financial institution simply deduct a predetermined amount from your main bank account on a regular basis.It’s painless.What you do not have you will not spend.

The power of compound interest is staggering.You will be amazed at how this saved money will grow. Lastly you will have reasonably ready access to your funds as in the case of a family or auto emergency.Sitting as a surplus in an IRS account means that you will have to wait for the IRS to process your funds before sending you that check.

If you are a business owner, forced to pay tax in bi- annual or quarterly payments then the situation is even more abusive to your tax payments. The extra surplus payments to the U.S. will not only not be paid interest but also may be money borrowed from the bank, credit union or finance company. Talk about adding insult to injury. Not only is the IRS not paying you interest on the overpaid taxes but you are directly paying interest charges for loaning that same cash. If you are using credit cards, take a look at your interest rates. You may be borrowing at high rates to pay more than necessary in taxes. (Hint, of you are receiving a refund on your taxes, you are overpaying!)

All in all we all have a duty to pay our taxes. However it is not wise and can be downright foolish to overpay taxes. It is really not to our financial or credit benefit. Peter Catalano

In : Taxes

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