As the 2011 tax season is almost over for many households, it is time to learn from your mistakes and make adjustments for your 2012 taxes. For the 2010 tax filing season, the IRS reported they received more than 142 million individual tax returns. The average refund was approximately $3,003. The IRS expects this number to increase this year.
Americans are receiving large tax refunds as a result of the instructions given to employers regarding deductions from paychecks, or estimated payments submitted throughout the year. This equates to the average taxpayer paying the U.S. Treasury $55 per week too much. While most look forward to a refund, the reality is that this is your money. You have lent the government money interest free rather than making regular deposits into a savings account or using the extra money each month to pay down personal debt.
If the government is holding more of your money than you wish, complete a new W-4, Employee’s Withholding Allowance Certificate, through your employer to decrease the amount withheld from your paychecks.
Likewise, if you are part of the estimated 20 million or more who owed additional income tax, you can change your withholding to account for exemptions and deductions that caused an increase in your tax liability. It is important to meet 100%/110% of your prior year total tax, or 90% of the actual or current year tax due, whichever is less. The 100% of prior year tax is for those taxpayers whose adjusted gross income was less than $150,000 married filing jointly or $75,000 for single filers. If your income is more than $150,000, you must meet 110% of your prior year tax liability.
What is even more financially offensive than lending the government money interest free is giving the government your money. The IRS estimates it has nearly $1 billion in unclaimed refunds that nearly 1 million people have not claimed for the 2008 tax year. This comes from those who paid taxes through withholding from their wages but may not have filed a tax return because they did not have enough income to require filing. April 17, 2012 is the last day to claim a 2008 refund; otherwise, the unclaimed funds go to the U.S. Treasury. If you’re in the business of giving money away, I’ll be glad to send you my address!
At Henssler Financial we believe you should Live Ready, which includes taking control of your money. After the April 17th deadline, our tax experts can help you with 2012 projections and provide advice on how to adjust your withholdings. You may call us at 770-429-9166 or e-mail at experts@henssler.com.