Tax Time! Ways to Save That Money?
Gosh, doesn’t it seem like tax time JUST happened? Well, it does to me, but I suppose it’s because I don’t really look forward to tax time like those that get tax returns every year. I remember when I used to look forward to tax time, when I knew that I had overpaid the government during the tax year, and would be getting a decent little return, but those days are gone now that I actually have to pay quarterly tax estimates, and it’s pretty much up in the air whether or not I’ll get anything back if I happened to overpay.
By the way, did you know that by having the most taxes taken out of your check as possible may not be the best idea? Sure, it means that you’ll most likely receive a tax refund at the end of the year, but what about if you took that extra money you got in your paycheck during the year if you claimed, say a “1″ as opposed to a zero (if you’re allowed), and invested it?
Many people don’t realize, but if they did that, they’d end up working out to have a lot more money in their pockets at retirement, even though they never got refunds or maybe even owed a little money at the end of the year.
Let me explain. If you’re not confident that you could take that extra money and actually invest it or use it to only pay off high interest debt, like debt from credit cards for bad credit or some other form of revolving debt, even if it is a low apr credit card for balance transfers of some sort, then you may be better off just having the government take the highest allowance out instead and getting your refund. This is why I think many people do it this way, because they don’t trust themselves to save that extra money and invest it, or they are afraid of owing Uncle Sam money at the end of the year instead of getting a tidy sum back.
I guess the bottom line is being able to take that money out of your check (the money that would have been the additional federal tax had you claimed with no allowances), and save it rather than spend it. If you think you can do that, many financial experts say that is the way to go. Otherwise, you are essentially giving the government an interest free loan for the whole year, while you could be paying yourself interest on that money for the whole year. Something to at least talk over with your accountant, I think!
