Why you DON'T want a big tax return
A lot of people get excited about a real big tax return but what's to be excited about? You just let the Government borrow your money for a whole year for free!
If you are regularly getting a big tax return each year, then that might mean that you need to increase the number of exemptions on your W-4 form. Why?
Most of the time, a lower number of withholding exemptions on your W-4 will mean more taxes are withheld from your paycheck - meaning the Government gets more of your money each payday. They can then use this money for whatever purpose until they have to give it back to you the following year in the form of a tax return.
The problem is that they got this money for free - meaning they didn't have to pay interest on it. Moreover, you DIDN'T get this money all year long.
Instead of renting out your hard-earned dollars for free, why not use that money to pay down debt? Let's say you increase your W-4 withholding exemptions and as a result you get another $50 each paycheck. Make that money work for you by paying down a credit card.
When it comes time to file your taxes, you might not get a real big tax return, but if you can knock out a credit card and free up a debt payment, you've essentially given yourself a permanent raise. Isn't that better then loaning someone else your money for free?
Check out this W-4 withholding calculator to figure out how you might make an adjustment and start paying yourself instead of someone else.
If you are regularly getting a big tax return each year, then that might mean that you need to increase the number of exemptions on your W-4 form. Why?
Most of the time, a lower number of withholding exemptions on your W-4 will mean more taxes are withheld from your paycheck - meaning the Government gets more of your money each payday. They can then use this money for whatever purpose until they have to give it back to you the following year in the form of a tax return.
The problem is that they got this money for free - meaning they didn't have to pay interest on it. Moreover, you DIDN'T get this money all year long.
Instead of renting out your hard-earned dollars for free, why not use that money to pay down debt? Let's say you increase your W-4 withholding exemptions and as a result you get another $50 each paycheck. Make that money work for you by paying down a credit card.
When it comes time to file your taxes, you might not get a real big tax return, but if you can knock out a credit card and free up a debt payment, you've essentially given yourself a permanent raise. Isn't that better then loaning someone else your money for free?
Check out this W-4 withholding calculator to figure out how you might make an adjustment and start paying yourself instead of someone else.
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