Pay your taxes full and promptly
Pay your taxes full and promptly. But there is no need to overpay your taxes. It makes no sense in any financial or even civic sense.
Some people who are taxpayers think that it is a good idea to overpay their taxes. They reason that either that they will be on the “good side” of their local city government, property inspectors or even the Internal Revenue Service (I.R.S.)
Does overpayment of taxes make any sense in either a bureaucratic or financial analysis?
First of all as a means of saving money – a savings bank does overpayment of taxes make sense? Do the figures add up? It is highly doubtful that your local tax board is set up to pay you interest on the tax overpayment. If you are not sure – either phone and ask or look at your receipts. Do you see any deductions on charges for prepayment or overpayment? Some constituencies do reward taxpayers who pay early with a discount.
However the tax prepayment discounts are usually quite meager in comparison to the rates that banks, bonds or credit note interest rates. Not even to compare these interest rates to those charged on loans or credit cards.
It may be argued that by having a reserve that you are either avoiding late charges, which may be large, or extra fees and charges due to mistakes and errors that happen all the time. This is true. However these extra charges can often be avoided by some attention to detail when you pay your bills. It does not take a genius to check their bank account, and / or balance their bank book when making tax payments – especially large payments.
If you are a business then extra payment of your taxes makes even less sense. Businesses run on limited capital. If there are extra funds there are always uses for any available funds – whether it is for capital expenditure, staff or renovations to hotels and properties. Not only is your capital limited but these extra finds that you have given to the tax authorities which are just sitting there in the tax board fund , earning no interest, may be costing you interest at the bank .
All in all it is good and prudent to pay your taxes on time. In fact pay them early as a matter of routine. Why wait for the last moment like most people and taxpayers. It just adds stress, wastes time and may result in extra charges which even if they are not deserved will require a fair amount of time and wasted energy to correct.