Are you going to owe the IRS a lot of money this year? Money you won’t have at April 18? You can set up an Installment Agreement with the IRS and make monthly payments to pay off your taxes. You will owe penalties and interest on the taxes until you pay them off, but you can pay them off up to 36 months, and you can always pay more then the agreed upon monthly payment (Yes, the IRS is willing to take more money than you agreed to pay) and pay off things sooner. Here is a link to the IRS site talking about installment agreements:http://www.irs.gov/businesses/small/article/0,,id=108347,00.htmlJust like buying a car, isn’t it?
Brian’s Financial Musings
Did you know that even if you don’t sell your mutual funds, you have to pay taxes on capital gains and dividends? Every year mutual funds are required to distribute all of their dividends and capital gains to their shareholders, so you will get these distributions every year (dividends can be distributed monthly, quarterly, semi annually or at the end of the year, capital gains usually at the end of the year.) The worst thing is if you have requested that the funds reimvest these items in more mutual fund shares, not only do you have to pay tax on the money, you don’ have the money to pay the taxes! If you are in a low enough bracket some or all of these distributions may not be taxable by the feds (notice I didn’t mention the state) but it is a good idea to check your mutual fund account online or call your mutual fund shareholder services and see what gets distributed and when. You may avoid some nasty surprises when you file your taxes next year.
Brian’s Tax Musings
If you have a mortgage, just be aware there are maximum limits to the mortgage interest you can deduct. The interest is limited to a maximum of interest on mortgages of $1,000,000 and equity lines of an additional $100,000, for a total of loans of $1,100,000. This will not affect most people but if you bought a house at the top ot the market, you need to be aware of this item. So if you have more than $50,000 in mortgage interest the government may require proof that you are not deducting too much interest.