Paying your taxes each year can be a challenge. You sit down to do your taxes and then realize that you owe a large sum of money that you can’t afford. You suddenly need to find a way to pay off your taxes, throwing your entire financial situation into disarray. If you want to avoid this situation year after year, here are some tips you can use to make paying your taxes each year a little easier.
Know Your Tax Rate
The first thing you should do is know your tax rate. Having an idea of what your tax rate is going to be for the year will help you to prepare for the amount of money you’ll owe. You can find your federal tax rate by visiting guides like this one. After that, look up the tax rates for your state as well. It’s also a good idea to pay attention to the news, as you can often learn if tax rates will be changing in the upcoming year.
Calculate Your Taxes Early in the Year
The next thing you can do is calculate your taxes early in the year. While taxes are due in April, you don’t have to wait that long to start figuring them out. You can start calculating your taxes in January and figure out how much you owe. If it’s a lot, you can then use the time between January and April to put some money away for your tax payment. The more time you can give yourself to make your tax payment, the easier it will be to factor into your budget, so get a jumpstart on your taxes as early in the year as you can.
Save Up During the Year
Another thing you can do is save up money throughout the year. If you put away a little money each month, it will be easier to pay your taxes at the end of the year. You can use your previous tax payments to judge how much you might need to pay for the current year, then divide that amount by 12. If you can put this amount away each month, tax season will be a lot easier. Even if you can’t save up the entire amount throughout the year, having even a portion of it will help out when the time comes.
Get Assistance
If you’re struggling to pay your taxes, there are services out there that can assist you. One service you can consider is through the IRS, which allows you to pay your taxes in installments. This is often easier for people, as you don’t have to pay all your taxes at once.
Another option is tax relief services. These services will negotiate with the IRS for you in an attempt to lower the amount of taxes that you owe. Services like this can be helpful if you owe a large sum, but you will have to factor in the cost of hiring the tax relief service.
Look for Ways to Reduce Your Tax Burden
Finding a way to reduce your tax burden is another avenue you should explore. If you don’t owe as much at the end of the year, it will be easier to afford. One way to do this is by taking advantage of tax exemptions. It can be hard to know what you can exempt on your taxes, so you may want to talk with a tax advisor for more help. For example, if you work from home, you may be able to write off your home office, but in other cases, this is not allowed.
Pay Your Taxes Throughout the Year
Finally, in some situations, you can pay your taxes throughout the year. For instance, independent contractors can make quarterly payments based on their income estimates for the year. If they end up not paying enough at the end of the year, they can then make up the difference. If they pay too much, they will receive a tax refund. Paying quarterly doesn’t necessarily save you any money, but it can reduce the shock of owing a lot at once.
Explore Your Tax Options
Options exist to help you reduce your tax burden. If you dread every April 15th, you should spend some time exploring what options are out there for you. You may find that you don’t need to pay as much in taxes or that there are better payment options that will help in making paying your taxes easier.
