Many taxpayers have too much withheld from pay

People don't have to wait until tax filing time to take a simple step that could put more money in their pocket throughout the year.

A recent report from Motley Fool notes that about 75 percent of American taxpayers currently overpay on their taxes, as evidenced by the $2,400 average return that people get each spring. The financial Web site noted that this amount is comparable to a $200 monthly interest-free loan that taxpayers give each year to the federal government, even if they do get it back in a lump sum.

With this in mind, the article suggests that people take a look at last year's tax return, their pay stub and a fresh W-4 form to ensure that they are paying the right amount in taxes - while also taking care to avoid any potential penalties for underpayment.

People may look forward to receiving a large refund at filing time, but there are many things that can be done with the money other than having the government hold on to it for the year.

"A big refund at tax time may mean that the IRS is using that money interest free all year. Owing at tax time is not pleasant, but can be minimized. A withholding adjustment can be the key to resolving either of these tax dilemmas. Our online Liberty Tax Withholding Calculator can help consumers figure out if it's time to adjust withholding, and how to accomplish that task. Adjusting the amount of withholding by recalculating allowances claimed can easily alter the amount of taxes a consumer elects to have withheld from their paycheck throughout the year," said John Hewitt, CEO of Liberty Tax Service.

By consulting with a professional tax preparer, people can also benefit from a number of strategies and find even more deductions they may be able to benefit from.

Every effort has been taken to provide the most accurate and honest analysis of the tax information provided in this blog. Please use your discretion before making any decisions based on the information provided. This blog is not intended to be a substitute for seeking professional tax advice based on your individual needs.
Posted To: Tax Ranger's Blog By: Tax Ranger On: Saturday, January 23, 2010
blog comments powered by Disqus