WHAT’S THE BUZZ, TELL ME WHAT’S A HAPPENNIN’?

 

* Kay Bell, the yellow rose of taxes, explains "How to get your withholding just right" at DON’T MESS WITH TAXES.
 
Many people use excess income tax withholding as a “forced savings” and hope for a large refund at tax time.  But any excess withholding – the amount of your refund – is an interest free loan to the government.  Financially and economically speaking it is “more better” to break even or owe a small amount to Sam at tax time than to get a refund.  While interest rates on savings had been miniscule in past years, nowadays you can earn 3-4+% in interest from bank and money market accounts.
 
Some people are aware that if they got an extra $100 or more in each paycheck, they would spend it.  But some employees can elect to have money from their paycheck automatically deposited to a credit union savings account – so the reduced withholding does not show up in the actual paycheck. 
 
Conversely, owing Sam or your state too much can be costly.  Sam will charge a penalty for underpayment if you owe more than $1,000 on your return – unless your arse is covered via one of the “safe harbor” methods.
 
* The TAX FOUNDATION provides detailed information on “State Individual Income Tax Rates and Brackets for 2023”.  
 
* Back to Key Bell – she provides a primer on reporting “Additional Income” on Part 1 of IRS Schedule 1 in “Got more than wage income? Here's how to report it”.
 
* As you prepare to file your 2022 tax returns let me suggest you first purchase and review my book THE JOY OF AVOIDING TAXES - a valuable collection of tax planning and preparation advice, information and resources from my 50 years of experience as a professional tax preparer and over 20 years of posts from my tax planning and preparation blog “The Wandering Tax Pro”.  Click here for details and to see the book’s contents.
 
* And New Jersey taxpayers need to buy and read my report AVOID NEW JERSEY TAXES LEGALLY, which explains in detail a tax strategy a NJ married couple can use to legally save up to $300+ in NJ state income taxes and it identifies a special, I expect unintended, loophole in NJ state tax law that older married couples can use of to save as much as $2,500 in state income taxes.  Click here.
 
* Before I end my shameless self-promotion – there is also ROBERT D FLACH’S THE 1040 LETTER, A monthly newsletter of tax planning and tax preparation advice, information and resources based on my knowledge and experience from 50 years of preparing individual income tax returns for individuals in all walks of life.  Click here.
 
* Some good advice from the IRS in it’s news release “Tax Time Guide: Things to consider when filing a 2022 tax return” (highlights are mine) -
 
“Taxpayers should wait to file until they receive all their proper tax documents, or they risk making a mistake that could cause delays.
 
They should also review their documents carefully. If any of the information is inaccurate or missing, taxpayers should contact the payer right away for a correction or to ensure the issuer has their current mailing or email address.”
 
TTFN