There are two main schools of thought when it comes to stipulating your income tax withholdings. On the one hand, having all of your taxes (and maybe a bit too much) taken out of your paychecks at the end of the year makes April 15th smoother sailing. On the other hand, you’re sending in money early before you can get any use out of it.
The Benefits of Getting a Tax Refund
There are benefits to either strategy. If you’re proactive about paying your taxes, then you can:
- Avoid worrying about paying taxes around April 15th. You don’t have to change your budgeting strategy to make sure ends meet in the first quarter of the year.
- Spend more of tax season creating strategies to increase your refund. Once you know the money aspect is taken care of, you can focus on correctly filing.
- Get the peace of mind of knowing you’ll receive a check.
If you know budgeting isn’t your strong suit and you don’t want to worry about taxes, increase your withholdings. A tax accountant can help recommend the right choices when you start a new job or even if you want to change your withholdings at your current job.
The Benefits of Owing Money in April
If you like staying on top of personal finance, owing money is the better strategy. Then you can put your money to work in investments throughout the year instead of giving it up early. If you’re good at budgeting, you can estimate your owed taxes at different points throughout the year and build a budget to meet the obligation.
Even if your plan is slightly off, there are plenty of payment plans and extension options to account for the disparity. When money matters don’t stress you out, you can take on a more ambitious strategy and see that negative balance in April as a victory.
No matter which strategy is right for you, Roberts Tax and Retirement Planning can help you achieve your goals. Set an appointment or contact us here.