As the 2024 tax filing season approaches, understanding potential reasons for owing money to the IRS is crucial. Changes in income, withholding status alterations, and freelancing are among factors contributing to tax liabilities.
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Retirement Withdrawals, Unemployment, and Relocations
Individuals need to be aware of the implications of withdrawal from retirement accounts, unemployment benefits, and relocations to new states.
To estimate tax liability, experts recommend saving 15% to 30% of profits, varying based on filing status and income. Early filing is essential for a comprehensive understanding of tax obligations, providing time to arrange funds.
High-yield savings accounts offer an advantageous way to allocate money for tax bills, providing accessibility and potential interest growth.
READ ALSO: 9 Reasons You Might Owe Money to the IRS This Tax Season
Managing Tax Liabilities Through Smart Payment Plans and Refund Strategies
For those who paid estimated taxes, staying current helps in avoiding late penalties, with quarterly payments due throughout the year. If financial constraints prevent immediate payment, the IRS offers installment plans, settlement options, or partial payments, helping taxpayers manage their obligations over time.
To enhance the likelihood of receiving a tax refund, individuals should maximize eligible deductions and update their W-4 forms regularly. Utilizing tax refunds for emergency savings can be a prudent financial strategy, contributing to long-term financial stability.
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