How can I minimize taxes owed for 2006?

Question

After completing my 2006 Federal taxes, I owe $1,000. Can I invest this money in my retirement instead of paying the government? If so, how and when is the deadline?

Answer 1

If you already filed your 2006 tax return, you would have to file an amended return if you open an IRA now to lower the tax that you owe.on the 2006 return. If you haven't filed the return, get the IRA opened and make all the changes to your return and get it filed.

In the mean time you need to adjust your W4 to allow for proper withholding from your wages, because apparently you weren't having enough deducted from your pay check. Talk to your payroll dept and fill in a new W4

Answer 2

NO!!!! If you currently owe the IRS $1,000 for the 2006 tax year they are going to expect thier money. That money is no longer yours.You can invest you own money throuought the course of the year into a retirement plan (and up to the IRA deadline in April), but you may not take the amount you owe the IRS and keep it to invest after the fact.

The IRS is it's own sepearate entity. You can not take the money you owe them an pay any other part of the local, state or federal government as a trade off.

An paying into your own retirement account wouldn't be paying the governmnet anyway it would be paying yourself.
Technically because you owe the IRS a grand you've had that money all year (according to financialist) So throughout last year you've been allowed to keep a thousand bucks of the governments money which means if you had invested it over the last year you would have the 1,000 dollars plus the interest and you should still come out ahead.However, it rarely works out that way.

So no! You have to pay that money to the IRS. There are no other ways to use that money now. Try again for this year.

Answer 3

You can invest up to $4000 a year into a traditional (deductible) IRA. You will probably need to contribute all $4000 to reduce your $1000 tax to near zero. You have until April 15, 2007 to open a traditional IRA for the 2006 tax year. Make certain your contribution is designated for 2006, not 2007.

You can use an online tax planning tool or purchase TurboTax to play around with the numbers to minimize your taxes.

Answer 4

Daniel L is right. You can contribute to a traditional IRA up until April 15 (actually April 17 this year, as the 15th is on a Sunday and the 16th is a holiday in DC) for the 2006 tax year.

Answer 5

The only thing that you can do right now to reduce your tax bite for 2006 is to open a qualified IRA. (Assuming that you've done your return properly, that is.)

If you are in a 25% tax bracket, you'll need to put $4,000 in a qualified IRA prior to April 17, 2007 to wipe out that tax debt. Of course if you don't have $4k lying around that's not going to help you any.

Answer 6

Listen to Daniel L...he knows what he's talking about. You can open an IRA for 2006 in 2007 as long as it is done BEFORE April 15th 2007. Please talk to your financial planner or agent as they can guide you to make the right decision to help minimize your taxes owed using IRA's and such.
HOWEVER, if you've already filed there is nothing you can do at this point.
Good luck!

Answer 7

The government wants their money or they put you in jail for nonpayment. They also can garnish your wages. Pay them and start up your own IRA account as long as you dont' take any money out you are not taxed on it. You can't start your IRA after the fact it had to be done by December 31st last year.

Answer 8

that will reduce the amount you owe, but it will not eliminate it.....

Answer 9

talk to your agent or layer.