Taxes

Tax Time: Got a refund? Had to pay? Time to adjust your withholding

If you fall into any one of the following categories, you should consider adjusting your paycheck tax withholding for 2009:

  • You got a refund: the federal government is returning your money (that you loaned them interest-free) back to you
  • You had to pay extra tax
  • You are changing jobs
  • Your income is changing
  • You are expecting a child to be born or move out
  • Any other changes to family situations, health situations, charitable contributions, interest paid, taxes, etc

There’s not an easier time to adjust your paycheck withholding for 2009 then immediately after you complete your 2008 taxes. Why is that?  Because you have just about all of the information you need to fill out the withholding calculator at irs.gov.    Your tax forms from 2008 can help you estimate a lot of the deductions you may be able to take in 2009.  It takes about 5-10 minutes to go through the calculator, but it could mean more money in the bank over the next year or it could save you from having too big of a tax liability that forces you into paying estimated taxes on top of your paycheck withholding.  It is well worth your 10 minutes!

According to crosswalk.com’s article Adjusting Your Tax Withholding Could Be a Money-Saver,  “If you received a $500 tax refund (or more), adjusting your federal tax withholding could boost your take home pay by at least $40 a month.”

If you got a refund: stop giving interest-free loans to the government – invest that money and make it work for you instead!  Your goal should be to get as close to $0 as you can!

I am curious how close you came to $0 this year, and what you plan to do with your paycheck withholding for next year.  Let me know in the comments!  Haven’t done your taxes yet?  Check out my experience with TurboTax 2008.

Links:
IRS.gov 2009 Withholding Calculator
Free Money Finance: Don’t Give the Government an Interest-Free Loan

(Photo: nickstarr)

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