The government doesn’t need a loan from you… that’s what the Federal Reserve is for.
That said, the most recent Treasury statement shows that the Feds collected a record $1,143,141,000,000 in individual income taxes through the first eight months of fiscal 2018 — that’s $1.1 TRILLION — and still, the government ran a $532.2 BILLION deficit those same months.
So perhaps they will be asking all of us for “loans” in the future.
However, you certainly don’t need to make their job any easier, right?
That’s why, if you haven’t already done so, it’s a very good time to make some tax moves.
Here’s what I mean…
Emelia Mensa EA, CPA, CGMA’s Tax Savings Strategies Stop Loaning The Government Your Money
“Don’t let yesterday take up too much of today.” – Will Rogers
We have a funny job when we prepare our Connecticut clients’ taxes.
Because, well, we have learned that many people consider it a “win” when they receive a refund back from the Federal (or state) government.
However, as it actually happens: this is a loss on your books.
You probably understand this already, but when you receive a refund, what this really means is that you have been been “loaning” the government your money all year.
A refund means that you overpaid, yes? So, this week, let’s stop overpaying.
And while there are certain exceptions to this principle (e.g. certain people with lower incomes who pay little-to-no tax), that little rush of joy you may have felt by “finding money” via a refund is a trick your mind is playing upon you, and should be checked against the reality that you have lost the usage of that money ALL YEAR, while big Uncle Sam has been (over)spending it on your behalf.
And they don’t pay you any interest, by the way.
So, with new tax rates from the recent legislation (the TCJA), it is well beyond time for you to take a look at your withholding, and likely make some adjustments.
And this is especially true if you have children. Under the prior tax law, the child tax credit (CTC) was $1,000 for each eligible youngster. The TCJA doubled that to $2,000 for each qualifying child.
Depending on your “prolificness”, that could be some serious savings right there.
But in addition to that, there are brand new tax tables to take into account, as well as all kinds of tax savings that we are eager to find for you (via tax planning, if you’ll let us).
So here’s a good idea:
To begin, all you have to do is take your cash flow for this first half of the year, and multiply by two. (Project forward through the end of this month, June). Add up your wages, dividends, interest, and any other income, and then — if this represents approximately what you’re expecting for the second half of the year — double the sum.
By then comparing this against your projected withholding, you can adjust the withholding on your paycheck in advance as needed, and ensure a happy visit to our Connecticut office in the early winter.
This can also be a good time to organize your financial records or get started with some financial software. (YNAB, MVelopes, Quicken, etc.) Getting organized now can make finding even more deductions a breeze, come tax time.
Emelia Mensa EA, CPA, CGMA
Emelia Mensa CPA