Some Iowans getting unpleasant calls from their tax preparers this year due to changes in federal tax law last year. Instead of getting a refund or breaking even, a number of us are finding we owe a few thousand dollars in federal taxes. Jeff Strawhacker, a CPA in West Des Moines, explains what tax changes are catching people by surprise.
“The primary one is the withholding tables, which were revised last spring, 2009,” Strawhacker says. “What that did, it lessened the amount of taxes being taken out of people’s paychecks and has caused some people to have some larger-than-expected liabilities or smaller-than-expected refunds this year.” For Iowans who find themselves writing big checks to the U.S. government, he says to take a close look at your withholding and make changes now for the rest of 2010.
“If you’re already at zero allowances, you can check the box and ask your employer to have additional withholding taken out of your paycheck,” Strawhacker says. “Even if you’re married, you can request to have taxes withheld at the single rate, or, the third option, you can always make quarterly estimates to the government.”
While some Iowans may celebrate when they get a fat refund check, Strawhacker says he’d rather not see his clients go that route. “A big refund is nothing more than an interest-free loan to the government,” he says. “You’re giving them your money throughout the year. They’re not paying you any interest and they’re just returning it to you at the end of the year. I would rather see people have that money in their pocket throughout the year using it for whatever they need to, come down to the end of the year, either have a small payment or maybe just a smaller refund.”
For Iowans who still haven’t finished their federal returns, Strawhacker reminds them they can apply for an extension, but he notes, it’s only an extension on filing your return, not on paying. You’ll still need to send off a check for what you likely owe. The federal tax deadline day is Thursday.