Adjusting your withholding
Each year around this time I start thinking about Christmas shopping and doing my tax return. Two things that could be fun, but because of the process involved, never is. Not sure there is much I can do about the Christmas shopping thing, but with the ever improving tax software that is available, finishing my tax return is something that I can do in a very short time. As soon as I am done I know exactly what my tax refund is going to be and if I use e-file I will receive my tax return in just a few days. I have talked to many people who look forward to getting a large tax return each year as if they are “sticking it” to the government. When you get a large tax return what it really means is that you have given the government use of your money, a loan if you will, for the entire year and they are simply returning it to you, without paying you any interest. Realistically speaking, the government is sticking it to you.
What can you do about it? Well, the easiest thing for you to do is determine how much more you should be bringing home each month instead of having it taken out as taxes. For example, if you received a $3500 tax return last year, then you overpaid in taxes approximately $300 a month. That is $300 each month that you could have used to pay off debt, build an emergency fund, invest for retirement, or save for college. I am sure you can think of several other things that would have made you more happy than giving the money to the government.
Here is a link to a Withholding calculator from Kiplinger.com. This is a very simple calculator that only asks you three questions based on last years tax return. It may not be “dead-on” accurate, but if you are used to getting a tax return each year, this tool might be just the thing to help you kick start your debt repayment plan.
Related Websites - Size Matters For Emergency Funds
- The Cost of Cash
- Where Do You Live?-The Most Tax Friendly Cities In The United States.
- Unemployed? Yes, You Still Have To Pay Taxes.
- How to Find Financial Stability in Unstable Markets
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