Alright everyone. There was a video I took down earlier. Some people viewed it so I want to make sure I give you all clarity on the contents therein. Some things were on point, others a bit myopic holistically from a financial perspective. If you didnt see the video, no worries. Here is what you need to know: 1. Whenever you work a job as a W2 employee, youre required to fill out several forms. One of them is your W4 which gives the employer instructions on how to withhold federal taxes from your paycheck. It is true that many people use the set it and forget it method concerning these. However, life changes and what you filled out at the beginning of your employment may no longer be accurate if youve been there for awhile. Arguably, a good tax professional will advise you accordingly whether to increase or decrease your deductions as they analyze your tax return. We do for our clients all the time. Nonetheless, you could be withholding too much or too little monies from your paycheck. I agree many people have these incorrect, but seriously doubt (and I did check, but am willing to be stand corrected) the IRS has anything on their site alerting taxpayers to this regard. At the end of the day, these taxes and the interest they make are one of the primary income streams of the government. 2. One thing to remember is when you are managing your deductions, your tax liability remains the same. Think of it this way. If you owe me $1000, I may let you pay $1/month with a balloon payment at the end of 12 months or I may let you pay me $500/month and give you $5K back at the end of the 12 months. That said, you are better off paying $1/month, making the other $999 work for you during the year and then paying me...as long as you have the discipline and foreknowledge that in 12 months I will expect the monies. Again, you need a financial professional to work with you on these things if you arent comfortable figuring them out yourself. 3. Truth: a tax refund is many times not the best of things. I know that sounds strange, but many peoples tax returns are the results of overpaying taxes and it is money the government is giving back to you that should have been yours to begin with. HOWEVER, that is not the full story. After having done/reviewed/audited tens of thousands of tax returns, more people receive money back based on credits than on sheer income that was withheld. Things such as the Earned Income Credit if you have kids, education credits if you are enrolled in post secondary education, Schedule C/K1/etc. credits if you own a business or had unreimbursed business expenses, etc. All of these taken together dictate your return. However, apart from these, you DEFINITELY dont want to give the government an interest free 12 month term loan of your money that you could keep. As always, if you have questions, inbox me! #FinancialEXODUSFinancialFREEDOM
Posted on: Mon, 27 Jan 2014 23:35:05 +0000