I mailed a five-figure check to the United States Treasury today. January 18 is the deadline for paying the last installment of your 2010 estimated federal income taxes. (Actually, if you file your Form 1040 by January 31 and pay all taxes due then, you are still in compliance.)
Mrs. ToughMoneyLove and I always seem to owe the government tax money. It’s a combination of (a) not withholding enough from my paychecks; (b) decreasing mortgage interest deductions; and (c) increasing amounts of taxable self-employment income from my online ventures. I don’t mind owing taxes at the end of the year, as long as I am not penalized for owing too much. Lending money to our federal government at 0% interest is the worst option of all.
Until last year, I compensated by having large chunks of taxes withheld from my final two paychecks. Last year I opted to write a separate check on the final estimated tax deadline. I then mailed a smaller check for the balance when we filed our return in April.
To avoid paying an under-withholding penalty, a taxpayer in our bracket must meet one of two tests: (1) withhold/pay 90% of the taxes owed for 2010 or (2) withhold/pay 110% of the taxes we actually paid for 2009. I ran a quick calculation of our estimated 2010 tax obligation. It was smaller than 110% of our 2009 taxes so I wrote a check to meet test (1). We may get hit with a small penalty if the government decides we should have made estimated payments earlier in the year. I’m too lazy to figure that out now.
Although writing a large check to the government is no fun, it serves one purpose: a harsh reminder of how much work a lot of us have to do each year to support the government and those who don’t pay taxes but receive tax credits anyway.
So did any of you pay taxes today?
This is an article from Tough Money Love
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