Getting The Answer To Your W4 Questions Straight By Knowing What Payment Strategy You Should Use

If you are thinking about how to make filling out tax return forms less painful, you should really begin by knowing precisely how you should pay off your tax liability in the first place. Everything begins with your tax payment strategy. Once you have decided how, answering W4 questions should be a lot easier. There are 2 ways in doing so. One: you pay enough just so to cover the bases until next tax filing deadline. Two: you pay more in order to avoid the penalty for underpaying your tax liability.

In the first strategy, you can declare a lesser amount (as compared to strategy #2) and you may just get away without facing any IRS penalties at all. However, the problem lies when you gain a substantial profit for the covered year. In which case, you will be faced with paying off a higher overdue balance; not to mention the possibility of paying for penalties as well in the event someone notices your “oversight.” You can remedy this though, by simply filing another W4 tax return when you do earn more than your projected earnings for the covered year.

The second strategy dispenses away with the need to file a second tax return form. You simply pay a little more from the very onset, taking into consideration the possible earnings you will have from your savings account, or account from any money market source, or any proven stable investment schemes you may have. You do not have to include your possible earnings from speculative investments as these cannot be substantiated until they do materialize.

December 19 2008 03:45 am | W4 Assistance

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