Not the smartest idea right?
Paying taxes early instead of putting the money into a high interest savings account at banks such as Ally and ING and getting interest on it really doesn’t make much sense… or does it?
If you are in a situation like me where you are responsible to pay your own taxes at the end of the year it may be easier to make interim payments rather than be faced with one large tax bill come January.. never mind the penalties if you can’t scrape together the money in time!
I’ve always been of the view that I’d rather make my money work for me by earning interest rather than giving it to the tax man, I’ve recently come to reconsider that view as I’m mopping up my financial spills.
While I am somewhat disciplined in that I make sure I have enough money to pay important and essential bills such as snow removal and health insurance, I’m not so disciplined when it comes to money set aside for taxes. It is all too easy to use the money that’s just sitting there for a vacation in July – My mentality here is ‘it’s not so hard to put it all back, there’s still 6 months until tax time!’ WRONG. Inevitably other bills arise and it becomes harder and harder to put the money I loaned from myself back into the account while also setting aside current taxes. It’s too much and for that reason I’ve decided to voluntarily give my money to the taxman to hang onto.
I’ll owe the money anyway and the few dollars of interest lost aren’t worth the headache and temptations of trying to save it myself. So, I now send a cheque every month or two to the CRA and make sure to let them know it’s an interim payment for the current year. They cash the cheque and send me a nice statement letting me know how much money of mine they’ve got and when tax time rolls around I don’t worry.
I have a general idea of what I will owe in taxes, so at the beginning of the year I file my tax return and wait for the results to be returned to me. Then I pay whatever small balance is still owing or patiently wait for a refund. I’m really all about automating things and making things easier for myself. Although I am a person that is internally motivated and will thus not just let things go – money is sort of like a drug for me – it’s hard to stay away.
How do you handle your taxes?