Taking advantage of the Holiday Season by applying a few Tax Strategies
Once again, the holiday season we all look forward to, is finally here. Your expenditure is set to aim for the roof. However, you can take advantage of all this by applying a few tax strategies.
Reports from the Internal Revenue Service indicate that more than 102 million people received average tax refunds of $2,805 in 2011. If you are entitled to more than $500 come springtime, then in essence, you are giving the government an interest free loan on your earnings.
With 2012 fast approaching, this appears to be the ideal way to save some bucks, but still, you could opt for to plan for a slightly smaller refund and instead maximize your holiday time paychecks. In the end, you either end up free of debts or have a huge credit bill after the holiday.
You can still safely lower your withholding tax for December without creating a tax bill in spring. It is time to get your pay stub and W4 form. Use an online calculator to quickly revisit the number of withholding you are making and your tax status.
According to Lindsey Bucholz, a tax research specialist with H&R Block’s Tax Institute, a single person making $3000 per month and without exemption claims pays $391 in Federal taxes, every single month.
However, if you qualify for a single exemption, you can salvage $46 and almost $ 100 or more for two exemptions every month. In case you have kids but you are yet to take maximum allowances, then you could add up to an extra $185 in your take-home pay.
Lindsey cautions however that these situations vary from person to person. If for example you got some refund in 2010, then you can channel more funds into your income. But if you owed taxes last year, then you should not cut your withholding lest end up with a tax bill in April.
In cases your state of affairs change this way in one way or the other, maybe you finally tied the knot, or divorced, acquired a new home or got a baby, then it is highly recommended that you revisit your w4 forms. By just using a worksheet, you may actually realize that you actually entitled to some allowances that can help you pay down the high interest credit card debt that pending from either your wedding or the purchase of your new home. The only worry would be how to spend the money on buying your loved ones presents without administering a debt punishment to your pockets.
The more allowance you claim, the less tax is withheld. However, this only works if you have been receiving a considerable amount in refunds each year.
Time is indeed ripe for you to get in touch with your human resources department to ensure a speedy processing of your resubmitted form. If you later, like next year, opt to return to a higher withholding level, all you have to do is submit another W4 form after the New Year.
