You know that nice fat tax refund that you just got? If you are serious about getting a handle on your finances and paying off some debt, like high interest credit cards, it has to go. This seems like the last resort for those who are struggling, but really, it should be something that you look at every year in order to adjust it as needed.
If owing the IRS money is the worst, then paying them every month to hold your money only to withdraw it with no interest is a close second. That is essentially what you are doing when your withholdings are wrong.
The philosophy used to be that you would rather have money coming back than going out on April 15th. And, while that mindset is understandable, it is wrong if you are in debt and need to get out.
If you have someone who does your taxes, talk to them as well. This is because when you talk to your employer, you only take into account your income and not your spouse. Someone who is a professional will look over the complete picture in order to make the best recommendation.
Talk To Your Tax Preparer
Let us assume that you are going to be getting more money in your check every week because too much was being withheld, and you now want to shoot for a ‘break-even’ situation. You could potentially end up with another $20 or $30 in your check every week.
What To Do With That Money?
Use the extra in your check to eliminate some debt, preferably the loans and accounts that are costing you the most money. This little bit of extra money each week amounts to a payment of about $80 which will go far for you, especially if you add it to what you are already doing.
Pay Down Debt
If your debt is in good shape, put this money to work in the form of a high-interest savings account. Set it up so that the money is automatically deducted from your check and deposited into this new account. You’ll never miss the money if you didn’t see it in the first place.
Automatically Save
If you choose the savings account option, then keep it into an account that will allow you to get to the money when tax time comes around so that if you do owe some money to the IRS at tax time, you will have it available to you.
Use Savings to Pay Any Taxes Due
If you have had a major life-change during the year such as a marriage, purchase of a house or even the birth of a child, you should review your withholdings and make adjustments as needed.
Review Your Tax Withholdings Every Year
There are Internet based calculators that will help you determine how many allowances that you should be claiming. You can use one at the IRS’ own webpage here. Or consult with your tax preparer for more personal service. Whichever route you choose, take control of your taxes and put your money to work for you in helping you cut the amount of taxes you pay every year.
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Here is a list of common tax questions and deductions we hope you will find useful. If you don’t find what you are looking for, please visit http://www.fiscaltax.com/tax-tips