It’s the most wonderful time of the year…oh wait, its tax time not Christmas. Taxes, again! Some of us will spend hours getting papers together, completing our forms and submitting the paperwork to the IRS. Others, those who are more organized, are getting things readied and off to the “tax preparer”. All of us, in some way or another, are affected by taxes.
It is not the most pleasant thing to discuss, but we all are faced with paying our fair share. Regardless of what our fair share might be, we just do not like the idea of our money being given to the government. We support our government and want the government to function – we just wish they did not take our money!
I have always wondered what our real thoughts on taxes might be if we actually had to pay them instead of having them deducted (for most people) from our paychecks. Small business owners know exactly what I mean.
Many people I meet have no idea how to manage their payroll deduction amounts. Regularly I meet with people who are getting several thousand dollars back each year and are using their credit cards to put food on the table or struggling to make their rent or mortgage payment. Additionally, the money they are getting back is money that the government has “borrowed” for the last year and not paying any interest on. When I question them about their IRS refund many are amazed that you can manage the payroll deduction and subsequent refund.
My goal is to always stay within $500 of the zero mark. In other words, I do not want to owe them any more than $500 and I do not want to get back more than $500.
If you are one who is getting a big refund, or maybe you are paying a big amount, use the IRS W4 Estimator tool to determine what the correct number of exemptions should be for your withholding. At this website (http://www.irs.gov/individuals/page/0,,id=14806,00.html ), you will answer several questions that will give you the answer you need for your W4. If you are married and filing jointly, a correct exemption number will be given for each paycheck. Get a new W4 from your employer and update it with the new number.
When you start bringing home more money, make sure that you save some in the event you owe a little next year when you file your taxes!!
Finally, what are you going to do with your tax rebate check? Yes, that’s right – the IRS is sending you a check this spring so you can “help” the economy. If you are married filing jointly you can expect a check for $1200 and $300 for each additional child. Singles can expect $300 – $600. Oh, by the way, you must file your 2007 taxes to be eligible for the rebate.
What are you doing with yours? Can I suggest paying yourself? You read it right – finish off that emergency fund or add it to your debt snowball. What a great idea!