How to Avoid Owing Too Much in Taxes + Big Tax Refunds | Maximize Your Paycheck!! | Summary and Q&A

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March 5, 2021
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Debt Free Millennials
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How to Avoid Owing Too Much in Taxes + Big Tax Refunds | Maximize Your Paycheck!!

TL;DR

Learn how to adjust your tax withholdings to avoid owing too much or receiving a large tax refund at the end of the year.

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Key Insights

  • 🥶 Tax refunds indicate overpayment of taxes throughout the year, essentially giving an interest-free loan to the government.
  • 👻 Adjusting tax withholdings can help individuals avoid owing too much or receiving a large refund.
  • 🗯️ The IRS tax withholding estimator is a useful tool for determining the right amount to withhold.
  • ❓ Consulting with a CPA or accountant can provide personalized guidance for adjusting withholdings.
  • 👻 Unemployment income, side hustle income, and the student loan freeze can impact tax owed or refunds.
  • 🤳 Self-employed individuals may need to take additional steps when using the tax withholding estimator.
  • 👻 Quarterly tax payments can help offset a large owed balance for self-employed individuals.

Transcript

so many people celebrate when they get a tax refund when really all a tax refund means is that you simply loaned too much money to the government and you loaned the money interest-free in this video we're going to be talking about how you can adjust some things so that you are not owing too much in taxes and then also making sure that you are not g... Read More

Questions & Answers

Q: Why do people celebrate tax refunds?

People celebrate tax refunds because it feels like getting free money, but it actually means they overpaid in taxes throughout the year.

Q: How can I avoid owing too much in taxes?

To avoid owing too much, you can adjust your tax withholdings by using the IRS tax withholding estimator and consulting with a tax professional.

Q: What information do I need to use the tax withholding estimator?

You will need your previous year's tax return, your spouse's tax return (if applicable), and a W-4 form to make changes to your withholding amounts.

Q: What if I have self-employed income?

The tax withholding estimator can be used for self-employed individuals as well, but it may require additional steps and calculations.

Q: What should I aim for when adjusting my withholdings?

The goal is to get as close to zero balance as possible, meaning you're paying the right amount of taxes and avoiding a significant refund or owed balance.

Summary & Key Takeaways

  • Many people celebrate tax refunds, but it simply means they loaned too much money to the government interest-free.

  • By adjusting tax withholdings, you can avoid owing too much or receiving a large refund during tax season.

  • Use the IRS tax withholding estimator and consult with a CPA or accountant to determine the right amount to withhold.

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