It is Friday and Fridays are for fun. There isn’t anything fun about taxes but I can write about it anyway because it is my blog.
Very few people really understand the Federal tax code. I think it is created to be as confusing as possible. If people are confused then politicians can say they lowered taxes or that taxes were increased and no one can prove it.
There are people who honestly believe that if their tax refund is lower than expected they paid more taxes.
Getting a bigger refund usually means that too much money was withheld from each paycheck. In my case, because I am self-employed if I have a refund it means I overpaid my tax payments.
If I underpay my estimated taxes I end up having to make a payment to the IRS on April the 15th and I pay a fine for my underpayment. If I overpay I apply what would be a refund to my next tax payment.
It works the same way for people with W2 type jobs. If the amount of money that is withheld from each paycheck is barely enough to cover the year’s taxes there won’t be much of a refund. If too much is withheld the refund check is higher.
If too little is withheld then the taxpayer has to write a check.
To determine if you are paying more in taxes or less calculate income taxes as a percentage of your income.
If you are not sure how to calculate a percentage use this calculator. .
If your refund is too small have more money withheld from your paychecks so that next year your refund will be higher.
Remember your 2018 income taxes are due on April the 15th and that is just 59 days from today.
