NEITHER A LENDER NOR BORROWER BE!
In tax terms that means “pay your income taxes as you earn your income.” If done correctly, at the end of the tax year you would owe nothing to the tax agencies nor would you receive a tax refund.
That is rather straight forward if you are an employee. The employer withholds federal income tax, social security tax, Medicare tax and state income tax form your gross wages or salary. Of course, you must notify the employer about your tax circumstances such as: married vs single, number of dependents, other special situations. All that info is reported on IRS Form W-4 to the employer.
Hopefully, you are among the many taxpayers who are enjoying slightly higher “net pay checks” (more crumbs) as a result of the Tax Cuts and Jobs Act which reduced federal income tax rates and changes the withholding tables used by employers. The IRS has recently released a new feature that allows individuals to review their withholdings under the new tax laws and tables. I suggest you take the time to try out the IRS WITHHOLDING CALCULATOR here. Advising your employer of your current withholding status will prevent surprises at the end of the tax year.
The “pay as you go” requirement also applies to income from all sources including, investment, retirement, self-employment and Pass Through Earnings from a Partnership or S-Corporation. The IRS and the state tax agencies require us to make estimates of our tax liability and to pay the estimate quarterly. Failure to conform to the quarterly estimated tax payments will definitely result in BAD news at the end of the tax year as you will have to pay the total tax, plus penalties for not paying enough tax and for not paying at the required time, plus interest.
Of course, we are here to help if you find “estimated tax calculations” to challenging or if you have better options for the use of your time.
IN THE WEEDS
The Press is reporting that President Trump will nominate Chuck Rettig as the new IRS Commissioner. Mr. Rettig has spent the last 30 years or so in a Major Law firm defending clients with criminal and civil IRS tax problems particularly as they relate to “Offshore Assets”. He will be a major change from the current Commissioner who was a “management type” person without depth in tax law, litigation and procedure.
Ironically, the IRS has just announced that it is Ending the “Voluntary Disclosure” program that substantially reduced penalties for taxpayers that came forward to “Unveil” their Offshore Assets and pay their taxes.