Comments on: A Little Self-Discipline Can Save You Some Money

By: dimes

dimes — Wed, 07 Feb 2007 18:50:11 +0000

This, of course, is easier said than done unless your income never changes (would I were so lucky!) and if you never get any bonuses. AND if you have a tax schedule and a withholding schedule handy and if you collude with your spouse. There doesn’t seem to be a lot of middle ground, either you end up getting back $2000 in refund or you owe $2000. You also have to take into account credits, personal exemptions, and any changes from one year to another (combat pay, promotions, children entering or leaving the household, day care expenses, the affect of your AGI on your credit eligibility, etc). It’s really quite a hassle.

By: indio

indio — Wed, 07 Feb 2007 04:08:04 +0000

Last year using an online calculator provided by HR’s payroll outsourcer, I adjusted my allowances. I just finished doing my taxes and ended up owing $50. I realize now that what the calculator doesn’t take into account is whether or not you itemize deductions, dependent child care, 401K contributions, mortgage interest, charitable contributions, etc. So when using a caluclator to determine how many allowances you should sign up for you need to look at your entire tax picture. I kept the same nubmer of allowances for this year but I will make additional charitable contributions to offset taxes owed.

By: WearyTraveler

WearyTraveler — Wed, 07 Feb 2007 03:13:02 +0000

I’ve adjusted my withholding so that I’m getting a $340 Federal refund this year.
Virginia however – is kicking my butt. I owe $600 in state taxes. I’ll be upping my withholding another $50 this year.

For those who have the “discipline” problem, I opened a high interest savings account outside my normal bank. If you lower your withholding, have that money direct deposited into the second account. It’s there when / if you need it, but it’s out of sight while you’re doing normal banking and brokerage.

By: Gene Harris

Gene Harris — Wed, 07 Feb 2007 02:41:29 +0000

I agree with the tip JLP provided. I’ve been doing this for many years and it works great. You can use the IRS Department of Revenue Withholding Calculator here,

http://www.irs.gov/individuals/page/0,,id=14806,00.html
or http://www.dinkytown.net/java/Tax1040.html

However my favorite is this one. http://www.paycheckcity.com/netpaycalc/netpaycalculator.asp

It allows you to enter additional federal allowances, to see what effect it will have on your paycheck. The best thing to do first is enter the information as you’d file. Then get write down the amounts. Then goto the IRS Calculator enter the same information and find out what you’ll actually be required to pay. The government intentionally makes people over pay.

Example: Income: $25,000 according to PayCheckCity they’d take out $94.96 bi-weekly. That’s be a total of 26 paychecks x $94.96. Which means I’d pay approximately $2458.96. When the IRS Calculator says I should have only paid $1506. That’s a total of $952.96 I over paid. That’d be nice to have to pay for things like utility bills.

So now that I know that. I can go back to Paycheck City and do some adjustment to the number of allowances I’d put on my W-4. I increased my allowances to 3. Which makes the Fed taking out $55.73 bi-weekly. So the same math, which comes out to paying $1448.98 total. Then minus my tax liability of $1506 and then I’d owe the government $57. Which is okay by me.

However paying income taxes is not a law. Do a search on Google Video for “income tax” and watch dozens of videos from many different people who agree that federal income tax is a fraud. When the IRS is asked to show the law, they can’t do it.

SECRETS TO LIVING AN INCOME TAX FREE LIFE!
http://video.google.com/videoplay?docid=-5009035314360427692&q=taxes

That is a very informative video.

I hope this information motivates you to take action and stop being manipulated by the Federal Government.

By: Kimber

Kimber — Tue, 06 Feb 2007 20:01:54 +0000

I agree with sam.

The financially smart thing to do is as you suggest.

Unfortunately the tax refund is the only type of “saving” many people do. And getting the money in a big lump sum has a better chance of paying off debts than the smaller amounts.

By: sam

sam — Tue, 06 Feb 2007 19:38:52 +0000

The key to your idea is the self discipline part of it. Most people will get another $50 dollars in their paycheck and it will disappear and they will never know where it went. I consider myself fairly disciplined when it comes to finances, but think I would probably do the same thing. That is why I prefer to get a big refund.

By: gen-x-finance

gen-x-finance — Tue, 06 Feb 2007 18:53:14 +0000

I agree completely with this. I would rather have my paycheck increased every pay period then receive a big check at the end of the year. My ideal would be to receive a $500 or less refund after filing my taxes.

Be careful making too drastic of a change. I did this a few years back expecting to either receive a couple hundred dollar refund or owe a few hundred dollars. Well, I apparently miscalculated and ended up owing a few thousand plus penalties. I did a knee-jerk reaction and put my exemptions back to what they were and let the year ride out.

Since then, I have been slowing adjusting my exemptions. I am still receiving way too much back each year. Each year I increase the exemptions/allowances one or two and see what my refund is.

Also remember if you have a change during the year that will effect your deductions, you will need to submit another W4 lowering your allowances otherwise you may end up owing taxes and penalties!