If you expect a large tax refund this year or if you’ve already
received one, chances are you’re happy. But why give the government
an interest-free loan? Why not keep more of your money and invest
it throughout the year for your own benefit?
If you expect a large tax refund this year or if you’ve already received one, chances are you’re happy. But why give the government an interest-free loan? Why not keep more of your money and invest it throughout the year for your own benefit?
Whether you pay your taxes through withholding or you make quarterly estimated tax payments, you can take steps now to ensure that you don’t receive a large refund on your 2003 taxes – and that you don’t owe a lot of money, either.
Your tax bill in 2003 could vary from last year’s tax for many reasons. If you or your spouse get a new job or leave a job this year, your income may change. Perhaps your eligibility for the various tax credits, exemptions, and deductions that are available will change this year. If your income decreases or if you can take advantage of any of the tax breaks to reduce your taxes, you may be able to lower your tax withholding or quarterly payments and put more money in your pocket now. The opposite is true if your income rises or you lose eligibility for a deduction, exemption, or credit. In that case, you may have to increase your withholding or quarterly tax payments.
To adjust your withholding for 2003, ask your employer for a new Form W-4, and take the time to complete it carefully.
If you make quarterly tax payments, you should be aware of a change in the requirements for 2003. If your income is greater than $150,000, the prior-year safe harbor rule for 2002 required that your estimated tax payments and withholding add up to 112 percent of your 2001 tax liability. This year you’ll meet that safe harbor requirement by paying 110 percent of your 2002 tax.
For help in determining your correct withholding or estimated tax payments, contact our office.
Barbara Andres is a CPA and partner with the accounting and business consulting firm of Bianchi, Lorincz & Co. in downtown Hollister and in Morgan Hill.
