Preparing For Tax Season
How many allowances should I put on my W-4?
Deciding how many deductions to put on your W-4 is a hard factor to deal with. Let's start off on the simplistic side here - if you're a single individual, you don't own a home, and you're working a job, then the thing to put on your W-4 is 'one'. As you're single, you have one exemption; the tax law is designed for them to take enough money out of your paycheque so that at the end of the year you basically break even with the government. If you're married, you own a home, and you have a couple of children, you may be putting in four, five, six, or seven; it depends on the deductions that you're going to get on your tax return. Ideally if everything works out right, you should have enough taxes coming out of your paycheque so that by the end of the year when you file your tax return, you basically break even with the government. You might owe them a hundred dollars; they might owe you a hundred dollars. Owing a lot of money to the government means you should've decreased the deductions so that there would have been more money coming out of your cheque and you wouldn't have a large balance due. If you're getting a large refund, bear in mind that it's your money and the government isn't paying you any interest. So, you may want to look at those deductions and get more money in your paycheque instead of a big refund at the end of the year.
What can I do the rest of the year to help keep my taxes down?
You need to consider taxes all year long. You need to consider what can I do to alleviate the pain? What can I do to minimize the taxes? And there is plenty of things that you can do. As an employee or HR department, human resources department, has a lot of things available for employees. Larger companies have a large department. There's 41K programs, there's deferred benefit programs, there's what they call cafeteria plans where you can have the company take money out of your paycheck to help pay for child care, to help pay for medical. There's a lot of things available, so don't be afraid to sit down and talk to them about taxes.
How can I organize my records for taxes?
If you set yourself up to some kind of system and keep track of it all year long, it's going to be a lot easier, a lot easier to organize, and you'll have everything ready when the time comes. It could be as simple as having an envelope labeled medical, labeled taxes, a file folder that says income tax stuff, somewhere to do it. My own self at home, and I'm a CPA, but if you came to my house and you open up my desk drawer there is a folder in there that says "Tax Stuff". If I've got something that's going to relate to taxes I put it in that folder. At least it's at one place at the end of the year. You could do a very sophicated program. You could get a bookkeeping program. There's a lot of them on computer these days that will organized all of your data and make it a lot simpler. It's whatever you are comfortable with. The big thing is keep track of stuff as it happens. Don't wait until the last minute and try to remember what did I do in January when you're sitting at your desk in December.
