Five Big Money Savers for Me -- #1 Save for the Tax Man

    I still have to compile my monthly report from April, but I spent some time this weekend laying out the events coming up and determining how to change my budget to make them happen.

    It shook out to five things I will do to make sure I can pay for my professional trip and December trip without adding to my debt (the wedding is another story I'll get to later).

    #1 -- Automatically transfer money saved from adjusting withholdings to my hi-yield "emergency account."

  Problem: I adjusted my withholdings again to have a little more money in my paycheck. But then I got a little paranoid about not paying enough taxes at the end of the year.
   Problem solved:  The "extra" money will go directly to my HSBC account each month. Come tax time next year, if I owe any money, it'll be saved up in the account and I will get to keep the interest. If I don't owe any money, then I can use what I saved to pay down debt.
    (I am sure there is some simple way to figure out exactly what I'll owe and how much I can maximize my deductions... if someone out there has a suggestion, I'd love to know! And, I'll try not to be so lazy and find the answer myself as well)

    Tomorrow: #2 -- Downsize the apartment.

Comments

[GeckoGirl]

The IRS has a withholding calculator you can use to determine your approximate tax burden as well as what your withholding should be. It's on their website (www.irs.gov) and you will need your last paystub in hand as well as a rough estimate of any deductions you will have (charitable giving, student loan interest, etc.)

[D]

The easiest way for me, is to grab last years return. Go line by line and review each number.

Say my w-2 income is $40k - what do I expect for this year? a raise? stay the same?

Keep going and record your expectations on ledger paper or plain paper if you prefer.

I record with the line number, for easy track back.

Line 2 - $40k

etc

As you record your expecteds calculate as the return does. Using last years tax rates won't be that far fetched. Go all the way through. You'll have an idea as too what is to come.

I believe most tax softwares have this flexibility as well.

Don't worry. If your income is going to stay pretty solid or increase slightly, just make sure you pay as much tax throughout the year as you did for 2006 (less refunds).

Have a great day!