Sunday, April 12, 2009

April 15, 2008 is this week

Wednesday is the due date for filing individual income tax returns. It is a day to account for income earned in 2008. The law actually gives taxpayers a grace period from January 1 to April 15 to settle up for 2008.

Lots of taxpayers don't recognize that the income tax system taxes them throughout the period of their efforts and pay. A person owes tax throughout the particular year they work; it is a pay as you go system. Therefore, taxpayers who work as employees are required to have income taxes and FICA withheld and paid over throughout the year that they work. Self-employed individuals are required to make estimated tax payments to cover the taxes they will owe on the income they earn as they go along. If the withholding or estimated tax payments aren't adequately sufficient, penalties can result.

In any event, if the taxpayer gets in trouble in a subsequent year for what they put on their 2008 income tax return, and they have to pay additional taxes, they will also have to pay interest calculated from April 15, 2009. On the other hand, if a taxpayer discovers an error they made on their 2008 income tax return sometime next year or the year after, and they make a claim for additional taxes to be refunded because of their mistake, the government will owe them interest on the amount due to them because of the same rationale. Now, for what it's worth, Congress didn't make it entirely evenhanded. The interest rate you pay on underpayments of tax is in excess of the interest rate you receive on overpayments of tax. Now, you would have guessed that, wouldn't you? You know, you are dealing with politicians who were elected to represent you and your government.

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