This is the IRS: Welcome to 2024

A tale of tax days past and a little advice

(With apologies to my readers who live elsewhere)

Do you?

·      Expect a tax refund this year?

·      Worry that you might owe more money than you expect?

·      Worry that you’re missing out of credits and deductions that will help you pay less tax?

Every year in January, millions of Americans start racing to get their taxes done. Some are due refunds on their tax bill. But they may remember 2021, when refunds showed up late. I remember our mortgage broker complaining that she hadn’t gotten her refund in August.

I asked her what a refund was.

For so many years, we owed money to the IRS, and we were okay with it.

Except the year we owed over $5000. That was hard. One year we owed exactly $100, and I was cheering. “I got it just right this year!”

Only the other economists and accountants in the business college understood what I was so happy about.

I’m not a tax person, but I have a better than basic understanding of the tax code. I won’t tell you about deductions and credits. There’s tax people and software for that. Don’t make the mistake I did one year when I did my taxes by hand. It wasn’t that I missed anything, it’s just that I forgot to add an interest payment in my calculator. It took months to work out, while the IRS waited for bank data. But the interest payment was from the IRS!

I’ve bought tax software ever since.

And it’s helped. Last year was the first year we got a refund since I started working full time in 2002. A credit kicked in that I didn’t know about. It’s a credit for taxpayers over the age of 65 with a disabled spouse. Thank you, tax software.

This year it’s all up in the air. We’re both retired now and collecting social security. Our tax bill will be entirely dependent on our Schedule D income. I expect to owe the IRS again, maybe…

For the rest of you who are still working, besides getting your tax documentation in order, I’ll give you other piece of advice.

Check your W-4.

Some of you check it every year. Pat yourself on the back.

Some of you can’t remember what it means. You filled it once upon a time when you took your current job. That’s the small form that tells your employer how many exemptions you think you’re entitled to when they withhold money for taxes. I never took any exemptions, because I was the secondary earner in our household. All the exemptions we thought were realistic went on my husband’s W-4. Realistic isn’t the same as what the IRS tells you.

If you panic at the idea of owing the IRS money in April, then you may want to take fewer exemptions than you’re entitled to.

For those of who are retired or self-employed, you’re responsible for your own taxes. For 2024, April 15, June 17, September 16, and January 15, 2025 are the quarterly filing dates.

By the way, Tax Day is back to normal this year in the US. It will be on Monday April 15, as it supposed to be. But 2024 is a leap year, so you’ll still get an extra day. The earliest day to file is January 29, if you just want to get it out of the way.

I hope you’ve enjoyed my little tale of tax days gone by. Please join me as I start an inflation crash course tomorrow.

As always thank for reading.

Nikki