Today TaxMama® hears from Kim in the TaxQuips Forum with a sensible question. “I need to lower the taxes I will owe for 2012. In 2011, I owe $1,500 to IRS. I will probably take the standard deduction. Would it be best to have extra federal taxes taken out of my paycheck?”
That’s the easiest and least painful way to prepay your taxes by the end of the year.
Also, start looking at other ways to lower your taxes. If your company allows you to contribute to a retirement plan, do it. Even $50 or $100 per month adds up to savings AND reduces your taxes in several ways.
You might reduce your tax bracket; you reduce your adjusted gross income (AGI), which may make you eligible for a Retirement Savers Credit, or make it possible to contribute to an IRA. There are several other benefits that would come into play if you were itemizing – but that’s not an issue for you yet.
Another thing you can do, if your employer has a flexible spending account and you’re spending money on medical expenses (even if it’s only dental or eyeglasses or contact lenses) or child care – run the money through there. This saves you a lot on taxes – all the income taxes, as well as your share of Social Security and Medicare.
Incidentally, Bill Porter of PrideTaxPreparation.com in Minnesota, reminds us that by reducing your income this way, you also reduce your withholding. So, refigure how much your liability will be for 2012, and adjust your withholding accordingly. Bill recommends the IRS withholding calculator to help you re-compute the amounts for your Form W-4. If everything is fine with your state withholding, ask your payroll department to only apply the new W-4 to your IRS withholding.
And remember, you can find answers to all kinds of questions about cutting your tax liabilities and other tax issues, free. Where? Where else? At www.TaxMama.com.[Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the join TaxMama.com link – it’s free!]
Please post all Comments and Replies in the new TaxQuips Forum .