It’s tax time: Are you getting a refund or do you owe?
There are a few different angles you should consider during tax time.
It’s that time of year…tax time! Tax time can be great for those who get refunds and not so great for those who owe taxes. The deadline to file taxes is April 15, 2015 whether you are getting a refund or if you owe taxes.
If you are getting a tax refund, there are a few things you may want to consider. You may consider reviewing your tax withholdings so that you get your money throughout the year instead of one lump sum. Nonetheless, if you prefer a lump sum, how will you spend your refund? If you have debt or do not have any savings, you may want to consider these as a top priority. Jaime Gold suggests the following ways to spend your tax refund
- Pay off or pay down credit card debt (try to keep credit card balances 30 percent or less of your limit)
- Start or add to your emergency savings fund (aim for at least 3-6 months of your monthly expenses)
- Start or add to your retirement account (use a retirement calculator to figure out how much you need)
- Pay an extra payment or two on your mortgage (make sure it is applied to principal)
- Open a college savings fund for your child(ren)
If you find that you owe taxes, you do have options. If you owe $50,000 or less ($25,000 or less for businesses), you may qualify for monthly payments with an IRS Installment Agreement. If you have unique circumstances, you may qualify for an IRS Offer in Compromise and pay less than the full tax amount. The IRS suggests that you explore all other payment options before applying for Offer in Compromise. Additionally, you may want to review your tax withholdings so that you will break even instead of owing taxes. The IRS Withholdings Calculator can help you decide if you need to change your tax withholdings.
This information is for educational purposes only. Reference to commercial products or trade names does not imply endorsement by MSU Extension or bias against those not mentioned.