Common Sources of Negative Tax Surprises, Where Inflation is Hiding & Sale of Primary Residence Planned Solutions

In this episode of the Planned Solutions Incorporated Podcast, the US tax system is complex with many moving pieces that can lead to tax surprises. Changes in income, deductions, credits, or tax withholding can all lead to a taxpayer owing more tax than expected. Some of these changes can be anticipated by taxpayers so that they can plan to increase their tax withholding, make estimated payments, or at least make sure to have the
money set aside to pay the tax due at tax time.

Also, The latest inflation report revealed that several repeat offenders’ categories continued to be sources of inflation, especially shelter prices. However, several smaller sources of inflation have been less obvious including auto insurance, food away from home, hospital services, and motor vehicle maintenance and repair.

As well, The Personal Residence Exemption (Section 121) is one
of the largest tax breaks in the tax code. It allows an individual to
exclude up to $250,000 ($500,000 for a married couple where both spouses qualify) of gain from taxation on the sale of a primary residence. To qualify an individual must have owned and lived in the home as their primary residence for two of the prior five years from the date the sale of the home closes.

Plus a look at the Planned Solutions Incorporated Office Bulletin Board - Tax returns are due April 15th this year, giving us a little less than a month to get those returns filed. However, for those who will not be able to get all of their documents together in time, there is the option to file for a tax extension which allows the tax returns to be filed at any time before October 15th

A common misconception is that a tax extension is an extension of time to both file tax returns and pay any tax that is due. This is not the case. Any tax payments that are due for 2023 are still
due on April 15th, even if the tax return is put on extension and filed later in the year. Therefore, even if a taxpayer files for an extension they must get as much of their tax return done as possible so they can estimate the amount of their refund or tax due as accurately as possible. If there is likely to be some tax due, they will need to make a payment with their request for an extension of time to file.

Even if an extension is filed, a failure to pay any tax due by the April 15th deadline may result in late payment penalties as well as interest charged on the amount due. These additional costs can add up, especially now that interest rates are elevated making it more important than ever to accurately estimate the amount due before filing for an extension.

Chase Armer's book- Financial Planning Insights is now available at:
https://www.amazon.com/Financial-Planning-Insights-Decades-Planner/dp/1098306279?ref_=ast_author_mpb

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The Personal Finance Review is published and distributed biweekly by Planned Solutions, Inc. for informational purposes only. Please seek the advice of a qualified financial planner before taking any action.

Planned Solutions, Inc.