Natalie Cooper for BankingSense.com writes: If you are like many other taxpayers, you may understandably dread the arrival of tax day each year. But if you begin your tax planning now, several months in advance of April 15, you may be able to pay a lot less in taxes or get a bigger refund!
Planning for Tax Day
When you prepare your tax return, you may be one of the many individuals who will receive a refund. On the other hand, you may be dismayed to learn that you own money to the IRS. Being able to estimate your tax liability can help you to better manage your finances, and it may minimize the shock that some taxpayers experience when filing a return. Each year, different tax changes made by the IRS coupled with changes in your own financial situation may affect your tax liability. You do not have to wait to prepare your tax return to learn how much money is owed to you in a refund or how much money you owe to the IRS. Instead, you can use one of several helpful tax return estimator tools online to better manage your finances.
TurboTax.com
Whether you use TurboTax.com to prepare your tax return or not, the website provides taxpayers with several helpful tools and resources. In addition, there are also mobile apps that you can use away from your personal computer for greater flexibility. These tools can be used to help you determine how much money to withhold on your paychecks when you fill out your W-4 form with your employer each year. It can also be used to determine how changes in retirement withholdings, buying a house and even having another child will impact your tax liability. These can be used as planning tools before you make life-changing decisions, or they can be used after the fact to help you better plan and budget for your tax bill.
TaxBrain.com
Through TaxBrain.com, you can complete a very detailed estimation of your tax liability. This calculator is updated annually based on changes with the IRS tax code. It is fairly detailed, and you may need to have your previous year’s tax return in front of you to ensure that you input correct details. It takes into account everything from your age and number of children to your different sources of income and your deductions. Essentially, it walks you through the basic steps you would take when preparing your actual tax return, and you can manipulate some of the numbers to determine how making changes in your financial situation may impact your tax liability. While this calculator may take you several minutes or longer to use, it can provide you with very detailed and accurate information that is important for tax planning purposes.
1040.com
You can also visit 1040.com to estimate your tax liability for the year. This calculator is slightly more simplified than the calculator available to you through TaxBrain.com, but it does ask you to input details about your income, deductions and potential tax credits. It may require less time for you to use than the TaxBrain.com calculator, and it is great for taxpayers who need a rather accurate estimate of their tax liability but who do not require the amount of detail that the TaxBrain.com calculator will generate. This is a user-friendly calculator that may help you to estimate your tax liability and to make informed decisions about your finances.
While preparing and filing taxes may never be fun, you do not have to be surprised by your tax liability for your personal income taxes — and you don’t have to wait until March or April to begin. Whether you decide to use these or other tax estimators available online, you should ensure that the estimator is designed for the current tax year. Most are updated annually, but you may find some that are for previous years’ taxes. You should also be aware that these are estimates only, and they should only be used for planning purposes.
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