You Owe Money!

You don’t owe me any money. Well, at least right now (wink wink). 

But, I bet the IRS has said to you at some point - “You Owe Me Money!” If not to you, then definitely I know your family member or friend has had this happen to them.

I owed money, again! I just sent off my payment today and I think my taxes are too high. I’m not alone - A recent Gallup poll pegged the percentage of Americans who think their own federal income tax bills are too high at 57%.

One of the best ways, however, to INVEST and reduce your tax burden is to put money into a 401k or 403b plan. The most common complaint I hear is “Charisse, I can’t afford to put more money into my 401k plan because then I won’t have enough to live from.” Well, this might well be the case for some of you but I know it’s not the case for all.

Leave a comment below letting me know what your approach has been to putting money in your 401k/403b (or NOT).

The Case for the 401k or 403b

  • A regular allocation a 401k or 403b plan gets you in the game of investing for your own long-term benefit. You may not think that they’re actually investing, but you are since you’re investing in mutual funds within the 401k platform.
  • Regardless of your debt profile, if your company offers a “dollar for dollar” 401k matching program, putting money into your retirement account is a high return proposition – you are getting a 100% return on your money because for every dollar you put in, your employer puts in a dollar as well.    
  • Even in the absence of dollar for dollar matching, reducing your taxable income with a 401k will save you dollars at tax time. A 401k is tax-deductible, meaning it will reduce the taxes you pay today. Wouldn’t you rather put money up for yourself than pay the IRS? The maximum contribution to a 401k in the 2016 tax year is $18,000.
  • Putting money into a 401k when your housing expenditures are less than 20% of your income and your make over $75,000 in annual income IS easier – it just is. Anyone who tells you an different is lying. The more income you make and the less you spend on housing costs, the more income you have to invest.

What Should You Do?

Evaluate how much money you are currently putting into your 401k. Ask yourself – Do I need an adjustment given a desire to invest more and/or save money in taxes? Share your thoughts with me.

I Hate Taxes!

Happy leap year! I started gathering all of my husband’s and my tax data this weekend to file our returns for 2015. I was reminded of how much I hate the process of getting all the W2s, 1099s, giving statements, and other forms together.  It wasn’t always like this - when I was younger, I looked forward to a refund, so the process was smooth and fast - not the case lately! You know how it goes – the more combined income, investments, and/or savings you have, the more taxes you pay. But, you are also motivated to work more closely with a tax advisor to lower the tax amount (Thanks Frank – our advisor). I don’t mind paying my fair share, but boy, it’s hard to drum up excitement when Uncle Sam takes a big hunk L

Strategies to Get Those Taxes Done

It’s the year of action, however, so I’m taking it a little bit at a time so I don’t get overwhelmed. If you’re already done, comment below and share some tips you used to keep you going during tax season. Better yet, share this blog with a friend who is not done yet.

I read a couple of timely articles and did a few things differently to take away some of the mental anguish. I’m sharing the love:

  1. Productivity Wins – We’ve used Dropbox to store our tax files and we share the links/folder so easily with our tax advisor.
  2. Online Resources for You Business Owners – I’ve used Efile4Biz the last few years to send out my 1099s and it’s super-easy.
  3. Great reads:
    1. 7 Mistakes You Will Never Make Again – Yes, some of these will surprise even the tax whizzes. My favorite? Staying Current on Obamacare.
    2. Avoiding the Estimated Taxes Death Spiral – For you business owners to keep up with payments, don’t miss this read.

End of Black History Month

It’s the last day of Black History month, so I’ll leave you with this quote from one of my favorite businesswomen – Madame C.J. Walker – to help get you in gear.

“I had to make my own living and my own opportunity. But I made it! Don’t sit down and wait for the opportunities to come. Get up and make them.”

Get Yours. I Will Be Getting Mine!