Business, Education, Law, Political Commentary A Young Man Does His Taxes For The First Time March 4, 2023 Rand Simberg 5 Comments Rage and mirth ensue.
5 thoughts on “A Young Man Does His Taxes For The First Time”
The IRS pretends to tell me how to file my taxes in order to return my money they are holding as ransom and I pretend to pay what I owe by telling them how large a fraction to give me back. Well in my case, my tax preparation professional does.
Dude, the safe-harbor provision of withholding 1) do your income taxes and file them by April 15 to figure out how much tax you are paying for 2022, 2) adjust your withholding from “wages, Social Security and pensions or qualified retirement plans (can include IRAs) to either pay 100% of last year’s tax (110% for Federal if you are “rich”) or 90% of next year’s tax.
The benefit of doing this through withholding is that you can adjust your withholding rate throughout the year as you see fit to have enough tax money withheld. Otherwise, you will have to file Quarterly Estimated Tax Payments, not be late with them, and you cannot adjust those to put all your tax payment in the last quarter.
My cursory examination is that you can elect withholding for distributions from an IRA or a 401(k), but you cannot do this with ordinary investments. You cannot do this either with self-employment income (ugh).
If you are in retirement and cashing in investments, or if you are getting dividend or capital-gains distributions from your buy-and-hold investments, there can be benefit to cranking up your withholding on your Social Security. Paying your tax through withholding has the benefit that provided you have enough income to withhold, you can crank up your withholding later in the calendar year — can’t do this with Quarterly Estimated Tax payments.
This of course, is only for purposes of discussion on Rand’s fine forum and is not tax advice — check with your tax advisor or other source of tax information.
In this young man’s case, Turbo Tax or H&R Block At Home software are “a thing”, and it is worth it to pay the tribute money for electronic filing.
My dear fellow, when I was running my own consulting business as an S Corp I became intimately familiar with IRS Form 941. At that time my payroll service handled it and most importantly, on time.
That the IRS lends you the rope may or may not be of consolation come April 15.
And another conservative is born…
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