Now That Taxes Are Done…

You've filed your tax return, or your extension. Now you're done until next April (or this October), right?

No. You should take advantage of the snapshot you have of your tax, and financial life, to fine-tune your taxes.

Did You Get a Refund?

If you received a refund of just a few dollars, congrats for "getting it right." But if you got a refund of thousands of dollars, you need to fine tune your withholdings or quarterly deposits for 2007. Perhaps you had more deductions than expected, or took a loss on an investment … but commonly tax refunds are due to people using tax withholdings as a "forced" savings account.

Tax refunds are not good. That means you have been giving the federal government an interest free loan all year.

Instead of paying extra in taxes all year, and then getting the money back in April 2008, adjust your withholdings or deposits, so you come close to "breaking even." This may mean adjusting your W-4 with your employer to have a higher number of deductions, so less is taken out of each paycheck. 

Did You Owe Money?

You may have been surprised by a large tax bill this April. Perhaps you lost a deduction, made more money, or received unforeseen gains on stock sales. But right now is the time to adjust your withholdings and quarterly deposits to prevent this problem from happening again … especially if you owed penalties due to large underpayment of taxes during 2006.

Any tax program you use, or your tax preparer, should be able to help you estimate what your withholdings or quarterly tax deposits should be for 2007, and let you adjust for events that occur in 2007 (such as getting a raise). 

Take Action

If you got a refund or owed taxes, review your withholdings or quarterly tax deposits with your tax software or tax preparer, to determine if you need to make a change.