Check Your Withholding Tax
The average tax refund last year was $2,800.
If you’re expecting a tax refund this year, review your W-4 and consider adjusting your withholdings. If you earn an income, you probably pay taxes. A W-4 form determines the amount based on allowances you claim. Withholding too much from paychecks causes tax refunds. If you don’t withhold enough, you’ll owe taxes and possibly a penalty. So update your W-4 regularly and anytime you have a major life change. Some create more taxes, but others grant credit and deductions that lower your taxes. Adjust the withholding from your paycheck or, if you’re self-employed, your quarterly estimated payments to get as close to a zero-tax refund as possible.
In addition, changes in income, job loss or unemployment requires adjustments to avoid paying too much tax. You can adjust electronically through the IRS Tax Withholding website. Turbo Tax has a W-4 Withholding Calculator that can determine your allowances. If you discover that your current withholding is different from what the calculator states, ask your employer for a new W-4 to make the update. The earlier in the year you do this, the greater the impact on your taxes. Since $2,800 was the average refund last year, then taxpayers, in effect, gave the government a $230 interest-free loan each month. So don’t do that! Instead, think how you could better manage that money and adjust your W-4 today!
Now if you’ve been blessed with My MoneyLife, I invite you to discover the Crown Stewardship Podcast. They focus on helping you find freedom in your finances and career. You can subscribe at Spotify and iTunes, or listen at Crown.org.