Articles - Archived Money Matters

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Tax Time: What To Do If You Owe

While the vast majority of Americans get a refund from the IRS each spring, there are still quite a few people who receive a tax bill. To lessen the chances of this happening, consider the following:

Change your withholdings.

If you owe money to the IRS, one reason may be that you are not withholding enough money from your paycheck. Withholdings help you pay for taxes at the end of the year. Withholding less means you get more take-home pay with each paycheck, but it may also mean you end up owing money to the government come tax time. Use the IRS' withholding calculator at www.irs.gov to help you figure your federal income tax withholdings so your employer can withhold the correct amount from your pay.

Know your deductions.

There are certain deductions that are allowed regardless of whether you itemize. Such deductions include IRA and qualified pension contributions, student loan interest, moving expenses, alimony and medical savings account deductions.

See if it pays to itemize.

While the standard deduction is certainly easier, it may pay to itemize. Expenses that can be itemized include mortgage interest, property taxes, charitable contributions, state and local income taxes, and medical expenses. To determine if itemizing would be worthwhile, take a look at Schedule A of IRS Form 1040. If you're still not sure, do it both ways, then take the higher amount.

Make your payments on time.

If you owe money this year, note that there is a penalty, plus interest, for not paying on time, as well as for not filing at all. If you cannot pay the entire amount due, it may be in your best interest to get a loan from your Credit Union to pay the bill in full, rather than make installment payments to the IRS. That's because the IRS charges interest, plus late-payment penalties, on the amount owed.

For more tips, call an LGFCU financial planner at 877.367.5428. We want to help keep more money in your pocket!