Question from a reader:”What can I do for getting a bigger refund next year?”
My answer is plan for it now with your tax professional. One of the things that I do as a tax professional is give tax planning advice as well as managing expectations here at tax time.
If a client comes in who made hundreds of thousands of dollars and hasn’t paid anything in taxes, it is incumbant on me to say something like , “I can tell you now that it looks like you will be owing some money in taxes.”
Generally, especially at this time of the year, I would be responded to with a nodding of the head followed by the client stating, “I know.”
That is a gross example and the harder more subtle ones might be in the case of your return where you had enough withheld but for whatever reason (maybe not enough deductions, maybe not enough taken out in taxes or maybe your previous tax pro overlooked something important) you aren’t getting the money back that you thought you would.
Have your tax professional sit down with you and go over thoroughly what is going on financially in your life. Plan now by taking additional money in withholding (if you can afford and stomach it) and you can possibly see a tax refund coming back to you next year.
The inverse holds true for people who run their own business (or whatever situation they are in) and would prefer having their tax liability zero or as close to zero as possibility without the IRS hanging onto their money for the full year in the form of an interest free loan. As a tax pro, I would work the numbers to see based on projections of income what kind of quarterly tax payments should be made to avoid penalties but still keep the amounts in line with what the client is looking for. Your tax pro should work with you and do the same thing.
Hope that helps and hope you and all my readers are having a good 2009.
April 12 2009 Mid Day
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Kim Isaac Greenblatt
Managing Expectations At Tax Time