You must be one of those rich taxpayers we keep hearing about. One of those that isn’t willing to pay their fair share. Ok, sorry bout the sarcasm. You don’t mention any specific numbers, but if you are owing more than a couple percent of your annual pay, you aren’t having enough withheld. I too wrote a big check today, but I knew it was coming, and I made a mental note to set aside each month enough to cover the bill (beats giving the govt a free loan).
It is probably too late for this year because you don’t have enough time, but next year make sure you take advantage of all the deductions that the govt allows you. I saved a ton just off the clothes we donated to goodwill. I have always undervalued them. I have made jokes about the Clintons and how Hillary valued their clothes at such a high rate when she donated them. But now I grudgingly have to admit she was right. I bought a software that uses the IRS’s guidelines to assign a dollar value to charitable donations. Their value was WAY higher than I expected, and the company offers to back you up and pay your fines if you get your deductions disallowed.
Also if you are a property owner make sure you deduct all your property taxes, interest expenses, and the like.
If you are in a bind financially you can file an extension. You will pay more later (in interest) but at least you wont eat out of the dumpster like those other rich taxpayers are. You can also pay some now and the rest later, as others suggested.
I do have to chastise you though for not knowing until the last day what you owe. You have had almost 3 months since all your financial statements regarding taxes had to be sent to you. You should have known that you would be owing and could have saved some each paycheck.
What you need to do:
- Get with your HR people to determine what you should be paying in taxes. The way the IRS deductions are set up, if you take the standard deduction levels you either pay way too much or way too little. This is how the govt gets people to give it free loans. Take the amount that you owe for 2001 over what you paid in deductions, and have an additional amount (assuming you will make the same amount this year) deducted from each paycheck to make the amount approximately correct. For instance, my deduction is 2 plus $100.
- Start learning now how to reduce your tax burden. There are lots of deductions available to you. Learn about them. Look at a standard 1040’s itemized deductions page (Schedule A). Look into each of the sections to see if you qualify for any of them. If you do, look into filing an amended return for 2001 and maybe you can get some bucks back. I don’t know if you can, but maybe. One thing I havent used, but will in the future, is the medical account savings thingie. Since I don’t get sick I didn’t think it was worth it. However it can be used for prescriptions, and all your basic medical expenses. Basically it sets aside money tax free to pay for your medical expenses. However if you dont use it, you lose it. Just put aside what you know you will spend. For me, its mine and my wife’s prescriptions plus our annual doctor and dentist visits. Just by deducting the bare minimum like this i’ll reduce our taxable income by about $1000. That is $300 I don’t pay in taxes. If you try to deduct it from your regular taxes, the amount has to be in excess of something like 7.5% of your gross adjusted income.
Hope this helps, and plan better for next time! I think we all do that at least once, reduce our withholding then shit a brick when the bill comes due. Last year I owed almost $3000. I kept this year under $500.