Bah Humbug! Tis the Season for Income Tax
November 28, 2007
Do not shoot the messenger! Although I intellectually understand the necessity of paying my share of income tax, I too would rather not have the expense. As soon as the holidays are over, income tax information is deposited in my mailbox. Even though taxes are not due until April 15th, I know in advance if I am going to be required to pay.
If I have any idea that I might owe Uncle Sam, I need to plan for it now. If I wait until the deadline, it could mean financial disaster! For example, I know a man who spends his wages as fast as he makes the money. Saving for the unexpected, or even the expected, is not any part of his financial plan.
Thus, if he does not have the money, he simply chooses to ignore the fact that he owes income tax. If he does not file, maybe the Federal government will not notice. BIG MISTAKE! The IRS might not catch on today, but when they come across flagrant neglect or naiveté, it still costs big bucks in the end.
The penalties and interest of neglecting your civic responsibilities, whether you agree with them or not, can far exceed anything you can imagine. The process is similar to mating rabbits: you start with two little rabbits, and by the end of the year, you are overrun with the little creatures. Your tax bill will grow faster than multiplying bunnies, if you neglect the bill.
To avoid financial devastation that bankruptcy cannot even cure, budget for your income taxes, especially if you are self-employed. In the event you do find yourself owing Uncle Sam, do not shove the problem under the proverbial rug. Make arrangements to take care of your tax debt as soon as possible.
So, why am I being a Scrooge and bringing up taxes and the IRS now, instead of after the holidays?
Plan now or pay later. Before you spend every spare cent you have on Christmas, consider the financial responsibilities in the coming months. If you are going to need the money you are spending today, tomorrow, you need to adjust your Christmas budget.
You will have a much merrier holiday, if you do not have the financial pressures of next year weighing on your mind. Remember is does not mean you will become a Scrooge to live within your budget. After all, as the story goes, the Cratchits are far happier being poor than Scrooge ever was with all of his money.
Do you have any tax tips, or ways you celebrate Christmas that are inexpensive (free) and fun?
Tina
I simply do not understand people’s frustrations and anxieties about tax time. I’ve been filing taxes since I was 15 years old and just don’t get all the worrying people do. During this period, the IRS requested on two occasions to verify tax discrepancies or pay fines and what the IRS stated I owed. Both times, I submitted records, wrote justification, and received all clear notices from the IRS. If you aren’t trying to be sneaky, the IRS is pretty forgiving, so I disagree with Terrence on the issue, having experienced the IRS twice, and two State tax offices on two other occasions.
With this said, if you keep good records, tax time is just plugging in the numbers. You know you are going to have to file a tax return, so it shouldn’t be rocket science to know that you should be planning for it every year that you have income. Really, waiting until now to plan is rather ridiculous.
EXCELLENT advice! I couldn’t agree more!
Dealing with the IRS can be an absolute nightmare. I had to deal with them once for an issue that was completely not my fault. During the time I had to deal with them though, it was a complete nightmare because you can’t win with the IRS. If you owe them, they will get it.
You should always budget correctly for taxes. If you have ever found yourself owing the government money, and you aren’t the type to be able to save it, then you need to adjust your withholding to be sure you won’t come out on the short end of this stick.
If you think that it’s even a remote possibility that you will owe taxes come tax time, then you may as well save a little extra in an account that actually earns you money until you have to pay it. I wouldn’t suggest increasing any witholdings since you may as well have use of your money until you must pay it. Of course if you’re a chronic spender and can’t control yourself once you have the money in hand, by all means, increase your witholding.