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Financial Planning / Tax Strategies


Subject:  Re: VITA Musing #3 - The Last Word Date:  4/19/2003  2:53 PM
Author:  lorenzo2 Number:  65105 of 130955

Do you pass on hints or suggestions as to what could be done this year to avoid the short fall next year?

Oh, absolutely. After completing the return, I go over it with the taxpayer, schedule by schedule and line by line. For every line with a number on it, I explain how that number got there. And at the very end there's a final reckoning: total tax vs. total payments. If the taxpayer is getting a largish refund, I suggest that they might want to consider decreasing their withholding, and tell them how to do that. If they're having to pay a large amount, I tell them how to arrange for increased withholding, and in some cases, make quarterly payments. (Actually, the guy who got hit the hardest, payment-wise, had a fair portion of his income on a 1099-MISC, and so was hammered twice - nothing withheld and SE taxes. In that case, I showed him how to estimate the income and SE tax arising from Sched C type activity, and suggested that he be very careful to set that much aside on a regular basis.)

So yes, I make what I think are sensible recommendations. Will they do as I suggest? I don't know. The ones getting the refunds like the idea of getting a chunk of money from the IRS, even if it is their money to begin with, returned with no interest accrued. And I can see that the ones who owe might be reluctant (or unable) to have less to do with on a regular basis. When you're on the edge, financially, next April is a LONG ways off.

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