LPT: USA - Do you want bigger paychecks, adjust your withholding (IRS Form W4). Especially if you rely on refunds to pay credit cards/people back.

Submitted by Aegis2x1 t3_120ttdi in LifeProTips

Trying this again with a better title.

I didn't know that the goal of taxes is to not have a refund. If you can make the adjustment in your withholding you can pocket more per paycheck when you likely need it rather than waiting and hoping to pay people/cards back. Just make sure you still overpay a bit.

Meaning your refund is paid to you over 12 months instead of Feb-Apr the year after.

It takes a decent bit of research and you have to stay on top of it yearly. IRS Form W4, you can always send an updated version to your employer. This really helps when you claim dependents.

Example: child tax credits paid to you on your paycheck divided over 12 months means you might have the cash to buy your kids' clothing or food.

It doesn't apply to everyone but as a coparent Dad it freaking helped.

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Splyce123 t1_jdiy5dn wrote

This is the revised title? Jeeeez.

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Jaded_Prompt_15 t1_jdj14q3 wrote

It's still a bad LPT too.

If 5-10 dollars a paycheck is the difference between feeding your kid or not, a potential $200 tax payment would kill you.

Every year there's idiots that claim "exempt" from with holdings and then end up owing insane amounts of money because they didn't realize being exempt from withholdings didn't mean exempt from taxes.

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Saved_ya_life t1_jdk010l wrote

My ex-husband would file his w-4 so they’d take out the max amount and get a bigger refund 🙄 I told him that this was essentially just an interest free loan to the government. Why not just open a high yield savings account, calculate the percentage taken out for taxes at the max and then put the difference into the account.

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keepthetips t1_jdixseq wrote

Hello and welcome to r/LifeProTips!

Please help us decide if this post is a good fit for the subreddit by up or downvoting this comment.

If you think that this is great advice to improve your life, please upvote. If you think this doesn't help you in any way, please downvote. If you don't care, leave it for the others to decide.

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ChrisGeritol t1_jdjenbk wrote

This is bad advice all the way around.

>Meaning your refund is paid to you over 12 months instead of Feb-Apr the year after.

No, it means you won't overpay and therefore won't get a refund.

Also, if you DO rely on your refund to pay credit cards, you have poor money management skills and are better off not cutting off the refund. It's an interest-free savings plan, but at least you're saving it, even if it's forced. You'll still run up the same credit card debt because you refuse to live within your means, but now have no windfall to pay off the debt.

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Bryan_Mills2020 t1_jdmgsun wrote

I couldn't agree more. Some people act like getting a big tax refund each year is like winning the lottery. It isn't. It's their money and when they get it back it's worth less than when it was taken out of their paycheck, and the gov't pays no interest on that refund. The ideal situation would be to owe a small amount each year when you file.

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