One of your prime responsibilities being a loyal citizen is to pay your taxes in full and at the right time. Whatever your income is, no matter how low or high, you’re bound to pay the taxes. Unfortunately, there’s no way around it.
You’ve got to pay your taxes.
Now, you’ve got 2 options; you can either wait for the tax bill to give you a surprise (not a pleasant one, though) or prepare yourself for the tax day in advance. Your tax bill can put you in a tough situation, especially if you’re earning well. It might not be easy for everyone to take that significant amount of money from their earnings or savings all at once. Saving for taxes little by little every month is a good way to keep yourself stress-free. After all, not paying taxes isn’t an option, so why let something that’s a must-do disrupt your life?
You can set aside a particular amount of money for taxes every month so that when the time to pay taxes finally comes, you already have the tax amount ready in hand. So yes, it’s a great idea to put money aside for taxes on a monthly basis.
Let’s have a look at some of the cases where setting aside money for taxes on a monthly basis is the wisest thing to do!
You Got a Significant Raise
Getting a raise sure sounds exciting and is nothing short of an achievement. However, there’s one thing that comes with a salary raise, and that’s a rise in the tax you’ve got to pay. With a higher salary, your taxable income increases too, and that also increases the amount you’ve got to pay in taxes. If the raise is significant, it’s best to start setting aside tax money every month so that the tax bill doesn’t come as a shock!
You’re Receiving Unemployment Benefits
If you’re among the unfortunate ones who lost their job and are receiving unemployment benefits, you should start to save money for taxes every month. Unemployment benefits are taxable, and you will have to pay tax on it. So, instead of finding yourself in a deep hole when the tax day finally comes, it’s best to be prepared well in advance.
You Altered Your Contribution to Health Savings Accounts
Due to COVID-19, most people stopped going for their regular check-ups (non-emergency visits). As a result, they had more money in hand than they had reserved for healthcare. In these times, many people altered their contribution to their health savings account. If you’ve done that too, you should know that it’ll affect your taxes too. In case you increase your share, you’ll have to pay lesser in taxes, but in case you’ve reduced your contribution, you better start saving for taxes every month!
Other situations where you might have to pay higher taxes are withdrawal of retirement funds and purchase of property, among others. It’s best to start saving every month and save yourself the stress and hassle of the day!