Taxes might be the last thing on your mind as 2023 comes to a close.
Preparing ahead of time can help you minimize the hit.
“And it pays off to develop some good habits now.”
What is my tax liability?
If someone refers to your “tax liability,” it can sound rather intimidating.
Your balance isn’t due to the IRS until midnight on April 15, 2024.
Why would I owe money to the IRS in 2024?
There are several reasons why you might owe money to the IRS.
Your income changed in 2023
When your income increases, so do your taxes.
“If you make more income, you’re going to owe money,” Steber said.
you could check your withholding status and make changes at any time.
If your income fluctuates during the year, you’re able to adjust your quarterly payments.
Any overestimation or underestimation can be corrected in the next payment cycle.
There are severalexceptionsthat allow for penalty-free withdrawals, but you still have to pay taxes on that income.
You collected unemployment
If you received unemployment benefits this year, that income is considered taxable.
But that’s up to you.
Every state has its own rules and regulations, so double-check you understand the fine print before filing.
You no longer qualify for tax credits
Tax credits reduce the amount of income tax you owe dollar-for-dollar.
How much should I save for taxes in advance?
Where should I put the money I’ve saved for my tax bill?
High-yield savings accounts are ideal for short-term savings goals, allowing for quick access to withdraw and deposit money.
What if I already paid estimated taxes?
This applies to anyone who would owe the IRS $1,000 or more when their return is filed.
In 2023, quarterly tax payments were due on April 18, June 14 and Sept. 15.
The final payment for the 2023 tax year is due by Jan. 16, 2024.
If you don’t pay enough estimated taxes throughout the year, the IRS can charge you late penalties.
What if I didn’t save enough to pay my tax bill?
Saving money for anything is hard these days.
But having enough funds to pay the IRS when the time comes isn’t an optional expense.
Payment plans will accrue interest like any loan.
This allows you to settle your debt for less than what you owe.
The IRS determines your eligibility based on your ability to pay, income, expenses and asset equity.
At the bare minimum, file your taxes and make a partial payment.
How can I ensure to get a tax refund next year?
Once you secure a tax refund, take advantage of jump-starting your emergency savings.
