How to Pay the Exact Amount of Taxes You Owe in Advance
Now that most of us have paid our taxes – and now that we understand how our tax burden has changed thanks to the Tax Cuts and Jobs Act, it’s time to start planning for tax year 2019.
For some of us, this could mean trying to end the 2019 tax year with exactly $ 0 billed, meaning you’ve already paid all your tax arrears and nothing else . You will not receive a refund, but you will not have to pay additional taxes. It looks like a top tax score.
A recent study by SmartAsset shows that only six percent of Americans manage to get the perfect tax return. Montanians live better than the rest of the country for some reason; nearly eight percent of Montana residents paid the exact amount of taxes they owed in 2016.
If you’re the type of person looking for an exclusive – and elusive – $ 0 tax bill, Bankrate has a few tips to help you get started :
If you owe the IRS:
- Reduce the amount of personal benefits on your W-4.
- Or just ask to withdraw a certain amount from each paycheck. To determine how much you owe, divide by the number of pay periods remaining in the current year.
If you get big returns on a regular basis:
- Increase the number of personal benefits on your W-4.
- The adjustment will give you a little more money for each paycheck. Don’t just waste it, but consider opening an account – savings, money market, or CD – that will earn you (not the federal government) interest instead.
You may not be aware that the IRS Form W-4 has the ability to clarify the exact amount of tax that you want to withhold from each paycheck. It takes a little more work than just writing down the number of benefits you are applying for and hoping for the best, but the IRS has developed a retention calculator to help you get as close to that amount as possible.
Of course, if you expect significant changes in your income – or significant changes in your life, such as buying a house, getting married, or increasing the number of dependents in your family – it may be more difficult to determine your exact tax burden ahead of time.
Likewise, freelancers and people who pay estimated taxes may have to do a little extra work to try and get an accurate estimate. (A meeting with the CPA in the last quarter of the year may be helpful here; they may work with you to calculate this latest estimated tax payment, including business expenses and other deductions, so you don’t accidentally pay extra or overpay.)
But if you want to end the tax year 2019 by paying the government exactly what you owe and no more, you can do that. After all, six percent of us succeed.
If you are one of that six percent, what advice would you give to other taxpayers?