Millions of taxpayers eagerly wait for that much-need tax refund when April 15 rolls around.  Others are not so lucky, as they either break even or owe the government unpaid tax.  Along with unpaid tax comes fees and the accrual of interest.  Many people know what to expect each April 15 based on the amount of tax they are paying from paycheck to paycheck.  For individuals who are not familiar with how tax exemptions work, April 15 can be a shocking financial blow.  When entering the workforce for the first time, tax forms are unfamiliar, and oftentimes, employers are not very helpful in explaining how a W-4 and other tax forms work.

What Are Income Tax Exemptions?

When completing a W-4, you are electing how you want your paycheck to be taxed.  Exemptions allow you to pay a little less tax each paycheck so that you have more take-home pay.  Each individual is allowed to claim up to a certain number of exemptions based on whether or not the individual is single, married and/or head of household, among other classifications.  The more exemptions you claim, the less tax you will be paying each paycheck.  This is something that can help individuals who need more money right away.  However, there is a drawback that many people are not aware of.

Claiming exemptions can be a gamble if there’s a chance you will owe tax on April 15.  Some single individuals are able to claim one or more exemptions and still get a tax refund.  On the other hand, some married couples and/or individuals with miscellaneous or self-employment income, may end up owing thousands of dollars in taxes if they have claimed too many exemptions.  Tax debt has the potential to accumulate at an exponential rate year after year for taxpayers who are not withholding sufficient income to satisfy all income tax owed.

Don’t Learn the Hard Way

While some of you may have already experienced just how devastating it can be to learn that you owe thousands of dollars in taxes, those who have not should take all steps necessary to prevent the accumulation of tax debt.  Tax debt cannot always be discharged during a bankruptcy proceeding, and it can have a significant impact on the rest of your life, especially in terms of the property that you own.  Tax liens may be placed on your property, or additional money withheld from your paycheck in order to satisfy tax debt that you have been unable to pay.

 Speak with a tax and/or legal professional to determine how exemptions may affect you on tax day.  A way to avoid owing taxes each year is to withhold the highest amount possible each paycheck to essentially pay estimated taxes you may owe the following April 15.  When you are taxed at the highest rate possible for your income, you likely will either break even so that you do not owe any taxes, or you will get a refund.  It is unfortunate that many people are not adequately informed about the W-4 and other essential tax forms.  As such, speaking with a qualified tax and/or legal professional can provide you with the accurate information and guidance that you need.

Contact Kansas City Bankruptcy Attorney Douglas Breyfogle Today to Schedule a Free Consultation

Regardless of what type of debt you owe, it is important to get a handle on the debt so that it does not continue to hold you back for years to come.  While tax debts typically cannot be discharged during bankruptcy, you still have options available to you that will help you manage your debt so that you can stop the bleeding once and for all.  If your debt is simply taking over your life, it is time to consider speaking with a skilled Kansas City Bankruptcy Attorney.  With more than twenty years of experience, Kansas City Bankruptcy Attorney Douglas Breyfogle has the experience and dedication to find a debt-elimination plan that will work best for your unique financial situation.  Facing debt alone can be like a broken record, as you are left wondering what to do in order to move forward with a clean slate.  The decision to work alongside an attorney like Mr. Breyfogle is a step in the right direction, as you will have the guidance you need to make an informed decision about your financial future.  To schedule your free consultation, contact Douglas Breyfogle today by calling (913) 742-8700.