Categorized | Taxes

Don’t Pay the Government More Than You Owe

Paying taxes to the government is a painful process for many people as it’s quite costly and they Federal government is known for not being tolerant on late payments. The IRS will come after you for just about any reason they can find and it is important that your properly calculate your taxes and to pay them on time in order to avoid penalties and other problems.

In order to properly pay the government you need to understand which tax bracket you are in and how much you should be paying with each paycheck. Employers will deduct taxes from your paycheck but you may end up needing to pay quarterly taxes in addition to this. Anyone that is self-employed must pay estimated taxes in order to make sure the IRS doesn’t come after you. If you owe more than $1,000 when your file your yearly income taxes you will need to pay a penalty for underpayment. This is why it is so important to calculate your taxes correctly and to make equal quarterly tax payments.

How can you figure out how much you owe? Use last year’s taxes to help you as you need to estimate how much money you will make this year and then calculate your deductions. Use Form 1040-ES as it will help you to work your way through the quarterly taxes and it also includes a payment stub to send in for each quarter along with the address where your quarterly payment must be mailed to. You can set up an automatic deduction from your checking account with the IRS website. This way you won’t forget to make your estimated tax payments and you will not have a late or underpayment fee as the money is automatically deducted from your account.

Use a good financial or tax program like TurboTax to help you properly calculate your taxes. They will come up with all the figures for you in order to give you estimated payment vouchers that you can use to mail in the correct amount to the IRS. One additional option you have is to apply your refund from this tax filing period to next year. This way you won’t spend the money and you will be able to significantly decrease the amount of money that you owe to next year’s taxes.

If you land in a situation where you cannot pay the tax you owe, you will need to set up a payment plan with the IRS. You must file your tax return on time and pay as much as you can at this time. Then you can contact 800-829-1040 to speak with an IRS representative about your taxes.  You will be enrolled in a payment program in which you will need to pay interest on the money but as long as you pay on time, you may avoid a penalty. Anyone owing less than $25,000 will be able to set up an online payment agreement but anyone owing over this amount must contact an IRS representative to discuss payment options.

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