Avoiding income tax next year

[W4MAJ]

It burned my bottom to write Uncle Sam a check last week and I was trying to think of a creative, legal way to avoid feeding the pig next year. I was considering increasing the amount that is taken out each payday to help soften the blow on April 15th then I was wondering if it would make more sense to take the same amount and put it in my retirement account. Does one dollar in my I.R.A. mean one dollar Uncle doesn't get?

This isn't the normal round of questions we get here on the 'Zed, but everyone I know has spent their income tax return already and are chomping the bit to get their rebate check. In other words, they're broke right now and don't have any answers and I don't know who else to ask.

Thoughts?

***Sidebar*** I write the Infernal Revenue Service a check and they send it back two weeks later. Does this make sense to anyone?

[W4HAY]

NO! The fraction of that dollar he doesn't get right now depends on your tax bracket! But you can bet your sweet arse he'll eventually lay his grimy fingers on it! :eek:

[N2RJ]

TurboTax has an IRA optimizer that you can use to figure out exactly what you need to know, William.

[WB2WIK]

Reminds me of how I invented copper wire: Battling over a penny with the IRS.:p

[K8ERV]

I thot Al Gore invented copper wire.

TOM K8ERV Montrose Colo

[K2WH]

Simple. You should do what I did. Go to your accountant and ask, how many deductions should I claim so at the end of the year so it is a wash. My accountant counseled me to enter "X" amount of deductions and next year, no one owed anyone anything except for a few dollars in my favor.

With your deductions set properly you can happily have very close to zero or you owe nothing more and/or they owe you nothing.

K2WH

[k9zmd]

This is not a way to avoid taxes, but it is a way to let your money work for you rather than for Uncle Sam during the tax year:

Set your deductions for the max legally possible. This will result in less money withheld, and more in your bank account. Here's the rub, though - you can't just spend that money as if it were really yours. Uncle guards his share like a bear guards its food, so you will have to file quarterly estimated tax payments. No biggie, really. Just stick that money into an interest-bearing account, then you get to collect the interest it earns while building up for the next quarterly payment. (I use a money market account for this; if someone has a better suggestion, please share.)

Those payments, BTW, are a piece of cake to submit - just send the check along with a completed 1040-ES (less than 1/4 of a page in size).

Riding that same train of thought: Never let Uncle apply your tax refund to next year's tax bill. Take it back and sock it into that interest-bearing account so it works for you (instead of Uncle) until you need it for quarterly payments or that new ham radio gizmo.

The suggestions here were provided cost-free, meaning (1) I'm not a tax pro, and (2) you might find it worth exactly what you paid for it. :D Ask your tax professional if the interest you would earn is worth the (little) effort you would expend. Right now, interest rates are so low that I only continue doing it to stay consistent.

[AB8RU]

I have enough taken out this round because of some people has no clue to whats going on, I have some deductions so I came out ahead, don't listen to these so called self proclaimed tax experts.

thre is a few that will get you in trouble, now I am aware I dont give them my money to give me false information, in fact this is GENIUS don't give to any place running tear jerking cry baby stories all they are is attention seekers. I seen this big put on , RALPH! so disgusting all that person was looking for is attention. then pass the bucket ! ( or loot ) .


I also decided not to give to any place handing out sob stories, and funny thing they are not even non profits ( 501 c 3 ) , be surprised how many gullible people fall for these money preditors.


:)

[KA8NCR]

It burned my bottom to write Uncle Sam a check last week and I was trying to think of a creative, legal way to avoid feeding the pig next year. I was considering increasing the amount that is taken out each payday to help soften the blow on April 15th then I was wondering if it would make more sense to take the same amount and put it in my retirement account. Does one dollar in my I.R.A. mean one dollar Uncle doesn't get?


No, it equates to a percentage that Uncle Sam doesn't get. Increasing your retirement deferments reduces your taxable income, but it's not a 1:1 correlation.

[KA8NCR]

This is not a way to avoid taxes, but it is a way to let your money work for you rather than for Uncle Sam during the tax year:

Set your deductions for the max legally possible. This will result in less money withheld, and more in your bank account. Here's the rub, though - you can't just spend that money as if it were really yours. Uncle guards his share like a bear guards its food, so you will have to file quarterly estimated tax payments. No biggie, really. Just stick that money into an interest-bearing account, then you get to collect the interest it earns while building up for the next quarterly payment. (I use a money market account for this; if someone has a better suggestion, please share.)


This is a minefield that needs to be cautiously navigated. If you do not pay enough on your quarterlies, you can be responsible for underpayment penalties. And in many cases, state underpayment penalties are nasty. In Michigan, it's an obscene 25%.