The most stressful and unpredictable tax season has passed, and we made it through; now what?
Now we prepare for the 2021 Tax season. That’s right, we prepare now for later. Failure to plan for success is a sure way to plan for failure. As a taxpayer, it is your responsibility to be a good steward of your finances. Being a good steward requires having a purpose, plan, and procedure.
PURPOSE: If you are not a good steward, start today. Aim to be debt-free and compliant with the tax laws so you may avoid the wrath of an unjust government.
PLAN: According to SOI Tax Stats – Collections and Refunds, by Type of Tax – IRS Data Book Table 1- The IRS collected $591,146,138.00 (Gross collections include penalties and interest in addition to taxes). These penalties and interest derive from a failure to file, late payments, and nonpayment of estimated taxes. Plan to be tax efficient. Avoid such penalties and interest by analyzing your financial situation and establishing a plan to make sure that all components, budgeting, banking, mortgages, investments, retirement planning, etc., are working together to allow you to pay the lowest taxes possible.
PROCEDURE: Now that filing season pressure is off, sit down and count the cost, review your financial documents, compare your bank statements with your receipts in comparison to your deductions. Your records must line up. If you owed the IRS this year, this could mean you were under-withholding from your wages or did not take all your deductions. If you received a large tax refund, you might also need to adjust your withholding because this can mean you are giving more money than necessary to the government each pay period.
As taxpayers, we are responsible for paying our taxes, but we also have an obligation not to pay any more than required. It is one of ten fundamental rights known collectively as the Taxpayer Bill of Rights.