Michaela Cavallaro
Tax day is a long way off. But if you want to avoid the annual April angst -- or at least tone it down to some mild agita -- you can take action now.
With that in mind, TheStreet.com is running a five-part series about year-end tax tips to lower your 2007 tax bill. The first order of business is to check your payroll withholding, the mechanism through which most working Americans pay the majority of their taxes. If you are having too much withheld, you'll get a hefty refund at tax time. That may seem like good news, but in essence you have granted Uncle Sam an interest-free loan when you could have been investing the money and potentially generating a return during the year. On the other hand, if you have too little withheld, you could get an unpleasant surprise when you see the bottom line on your tax return. (Even more unpleasant: the prospect of paying IRS penalties if you've significantly underestimated how much to withhold.) You can forecast how your withholding will pan out this year by checking with a tax accountant or by using the IRS' free withholding calculator. Alternately, run the numbers with a program such as Intuit's Turbo Tax. If it looks like you'll have too much withheld at the end of the year, consider claiming more allowances to reduce the amount that's withheld from each paycheck. The more allowances you claim, the less income tax will be withheld. Your accountant or the IRS calculator can help you determine how many allowances to claim. And then you can change the number you claim by filling out a new W-4 form and submitting it to your employer.
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