by J.C. Bailey
The month of April has taken more than its share of bad publicity over the years. The Lincoln assassination and sinking of the Titanic come to mind. Currently April has become synonymous with the joy of filing our federal income tax returns. Even if you file for the six-month automatic extension of time to file, you still have to do most of the work to estimate whether you owe additional taxes or not. If you owe additional taxes there is no extension of time to pay them without interest and penalties. As much as most of us hate to pay taxes, there are some valuable lessons to be found in our tax returns.
Most of us who pay income tax receive income. It may not be as much as we’d like or as much as we think we deserve, but most of us have some income. This presents us with the opportunity to make choices with regard to how we spend and invest it. If I owe more than $1,000 in taxes or am receiving more than $1,000 as a refund, I need to look at my withholding. Coming up with that much money to pay additional taxes may be difficult or impossible. Giving the government an interest-free loan for several months doesn’t make much sense either. If your income is steady, you should be able to set your withholding to come out about even come tax time. Talk to your payroll department or service.
Plan ahead and keep more money for yourself and your future. The tax code encourages both saving and investing for retirement. Make sure you know what benefits your employer offers. Human resources or payroll departments should be able to educate you on opportunities to save for the future and pay less in taxes. People who don’t have access to that information should talk to their accountant or financial planner. If your employer matches contributions to certain plans, you need to think hard before walking away from that money. In many instances, you won’t miss the money you are investing for your future and it will actually lower your tax bill. The earlier in your working life that you invest, the more impactful the results will be.
Most of us have discovered the truth that it is more of a blessing to give than to receive. Charitable contributions to qualified organizations are tax deductible. Americans are some of the most generous people in the world and our tax code encourages that generosity. Think about what is important to you and your family. Finding a cure, disaster relief assistance, faith-based initiatives and environmental causes can all use your help. Think about including those less fortunate or a cause that is close to your heart in your annual giving and include it in your estate planning. Times are tough, but a little planning can go a long way in helping you make the most of what you have.