apparently when you file for an extension on getting your taxes done, you still have to pay them now, you just guess how much it’s gonna be and pay that. joke’s on them, i’m always just guessing. that shit’s complicated.
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PSA: There’s an org out there called VITA (Volunteer Income Tax Assistance) Certified by the IRS. It’s not just for low income folks or simple returns, and it’s free. If nothing else it’s a great double-check that you haven’t missed anything!
Yeah when you work for yourself you’re supposed to just guess what you ought to be paying every 3 months or whatever. This is one of the reasons I like being a W-2 employee, doing US taxes is insufferable
I think that's how it's been for a very long time. "An extension to file is not an extension to pay" is a phrase I learned very early when learning about tax filing.
There's a whole industry of rich-person-accountants out there specializing in filing on the last possible day and trying to get penalty forgiveness on made up grounds, in order to earn half a year's worth of interest.
You can also just pay 110% of the prior year. It’s complicated because it’s based on changing laws and court cases as precedence and is hugely political and complex. I’m a cpa with 22 years of experience in tax specifically and yeah they know it’s a guess at best. Hire a pro tho
I log in to our national tax website, estimate my income for the year, how much i'll likely have left on my mortgage etc, how much i reckon I'll have in savings.. and my tax rate is adjusted and my employer takes it out of my monthly pay.
It's been that way for many, many years. We are a pay-as-you-go system. That means you pay your tax during the year, so technically, you shouldn't owe or owe very little when you file your return. You need to adjust your withholding if you owe or get large refunds.
Don't use the IRS as a savings account. They get the use of your money all year, and you get no interest when you get your refund. You would be better off adjusting withholdings and using that money in your everyday life or investing in your future.
There are also penalties for underpayment of estimated taxes. They aren't very large compared to the 'whoops-guessed-wrong' ones, but they are very certain.
I hear you. I think I would prefer to pay a small penalty rather than let the government use my money all year long and then hand it back to me in April, saying, "Thanks for the free loan!"
And when you let someone have the use of your money and they give it back to you, without interest, that is also not a smart idea, financially. But most people won't fool with budgeting and checking withholding frequently. They'd rather get that big check.
Actually, you are supposed to adjust your withholdings to get as close to zero as possible. That's the goal, no balance due or refund. My refund was $120.00. I did what I was supposed to do. The idea that you have to withhold large amounts is a myth. People use the IRS as a savings account.
The biggest source of the problem is the combination of
(1) decades of attempts to run social policy through the tax code*
(2) a huge aversion to official reporting of things.
People can basically do the thing you're describing, though.
*(Write a check for childcare subsidies? No! Tax credit!)
It's just that they wouldn't get the tax credits they're due, and could end up owing a lot more. Also they just don't know how to because of an endless amount of propaganda.
What is irritating to me is that if they think you haven't paid enough into withholding, they don't like it if you want to pay it all when you file your taxes and you will pay a penalty. They want it paid quarterly before you do your taxes.
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But take that with a grain of salt. I worked for H&R Block in 2017 and boy, are they assholes.
And they will.
I log in to our national tax website, estimate my income for the year, how much i'll likely have left on my mortgage etc, how much i reckon I'll have in savings.. and my tax rate is adjusted and my employer takes it out of my monthly pay.
But I'm told America is ... not like that. Some complicated tax code and businesses existing to help you figure it out?!
The information you give for withholding is simpler, though, and your employer does the calculation.
Most of the complication is a lot more writeoffs and stuff, and people have been convinced it's different.
This is not financial or tax advice.
Also this is a very dangerous gamble when it comes to money, and a super bad idea (which is why there are laws against it).
I'm in the ass end of Africa, and my tax goes like this
Log into the govt tax website
All info from previous tax year is already there (salary/investments/medical aid etc)
Click submit
Takes 5 minutes
(1) decades of attempts to run social policy through the tax code*
(2) a huge aversion to official reporting of things.
People can basically do the thing you're describing, though.
*(Write a check for childcare subsidies? No! Tax credit!)
Taxes are required to be paid that way for everyone! The return is just reconciliation.