Our idea of a “homerun” when it comes to your tax returns is +/- $1,000 in refund or owed on your federal tax return. That number could be even lower for your state return, depending on your state and specific situation.

But WHY?

It feels good to get a refund from the IRS and state… but the truth is that the money coming back to you has been in the hands in the Government as an interest-free loan. On the flip side, it feels bad to owe money when you file taxes because most of us are human and do NOT set that capital aside knowing that we are going to have to send it in. The closer we can get to $0 owed and being returned, the more that we can say that we have our situation perfectly dialed in.

How can you accomplish this tax triumph!? It’s not easy for most people and not possible for many. The best thing that you can do is work with your tax professional and wealth management team to regularly review your withholding on various paystubs from work, Social Security, or any other income stream. You can also adjust your withholdings on withdrawals from retirement accounts and make quarterly estimated payments, if needed.

This can be extra work, but it should ultimately help you manage your lifetime tax bill and take some of the stress out of filing your taxes in March/April each year.

Next up: All Things Capital Gains

Disclosures

This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.

Contributions to a traditional IRA may be tax deductible in the contribution year, with current income tax due at withdrawal.  Withdrawals prior to age 59 ½ may result in a 10% IRS penalty tax in addition to current income tax.