It’s good to owe taxes when you file your return.
I know that sounds crazy, and it’s definitely not a popular opinion…but it’s the best situation for you financially…especially if you're a single mom stretching your income to support your family.
After all, there’s a reason it’s called a tax return: The government has to pay you back the extra taxes you paid – literally return your excess taxes. That means they’ve been holding on to YOUR money, and they haven’t even been paying you any interest.
Think about it: If you’re getting $1,200 back, that means you’ve been paying them $100 extra every month all year. It’s a good deal for the federal government, but a bad deal for you. You’d never voluntarily pay an extra $100 to your landlord, electric company, or Internet service provider, and let them hold on to it all year, right? And what single mom couldn’t use that $100 monthly budget bump?!
So the best case: you’ll get a very small refund ($100 or less), or owe a small amount. That means you’ve estimated your tax liability well, and kept the use of your own money throughout the year. You could be using your money every month, all year, to pay down credit card debt, kick extra money into an investment or retirement account, build an emergency fund (that pays at least a little interest), save for a college tuition…you get the idea. But like most people, so many single moms just hand over extra money to the IRS, then wait to get it back in a lump sum when they file their tax returns. That’s a terrible waste of your money.
As long as you don’t owe too much, you won’t face any IRS underpayment penalties or interest charges. You’ll avoid those extras if
The second part of this is not owing more than you can afford to pay at once, which can be easily avoided with careful planning during the year – we’ll talk about that in detail in an upcoming post. When you do it right, you’ll end up with more money in your pocket every month, and a very small tax refund or payment in April.
If you do end up with a balance due on your 2016 tax return, it’s very easy to pay your tax bill – even at the very last minute. In fact, there are 5 ways to pay, so pick the method that’s easiest for you. Be aware that some of these payment methods come with fees on top of your tax payment.
|IF you live in . . .||THEN use this address to send in your payment . . .|
|Florida, Louisiana, Mississippi, Texas||Internal Revenue Service, P.O. Box 1214, Charlotte, NC 28201-1214|
|Alaska, Arizona, California, Colorado, Hawaii, Idaho, Nevada, New Mexico, Oregon, Utah, Washington, Wyoming||Internal Revenue Service, P.O. Box 7704, San Francisco, CA 94120-7704|
|Arkansas, Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Montana, Nebraska, North Dakota, Ohio, Oklahoma, South Dakota, Wisconsin||Internal Revenue Service, P.O. Box 802501, Cincinnati, OH 45280-2501|
|Alabama, Georgia, Kentucky, New Jersey, North Carolina, South Carolina, Tennessee, Virginia||Internal Revenue Service, P.O. Box 931000, Louisville, KY 40293-1000|
|Connecticut, Delaware, District of Columbia, Maine, Maryland, Massachusetts, Missouri, New Hampshire, New York, Pennsylvania, Rhode Island, Vermont, West Virginia||Internal Revenue Service, P.O. Box 37008, Hartford, CT 06176-7008|
Tomorrow we’ll talk about what to do if you can’t afford to pay your entire tax bill at once – a situation many single moms find themselves in, especially if it’s the first time paying taxes on their own. Do not worry! You have several options that will keep the IRS off your back, and let you pay your tax debt over time without sinking your budget. The most important thing here is to file your tax return on time even if you can’t pay. Not only will that keep you from being charged with a penalty, it also opens up the number of payment options available.
Make sure you file your tax return and make your payment before midnight tomorrow (April 18, 2017). And, remember, it’s better to owe a little than to get a big refund.