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Revisit Your W-4 to Save More

Money Tip: Revise Your W-4 to Save More

If the IRS is sending you a big tax return this year it means that you had too much withheld from your paycheck during 2007. I know that many of you consider your tax return to be a forced savings account, so let's take that idea one step further. Considering you can afford to live without the money the IRS has been holding for you all year, why not direct that exact amount toward your retirement account?

Revise your W-4 so that you're having the correct amount of taxes withheld, and then average the amount of your tax return over 12 months. Increase your 401(k) contribution by this amount each month — you won't miss the extra money from your paycheck since it hadn't been going to your bank account anyway, and your future self will thank you. Already contributing up to the amount your employer matches in your 401(k)? Set up automatic deductions from your bank account to your IRA or savings account instead.


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caws caws 9 years
We have claimed the max number of exemptions, but fall into some loop hole where we have to send them the money, as we have maxed out our exemtions, but then they have to give us a big refund because of our mortgage interest. Our accountant says it's unavoidable because we are DINKs (dual-income, no kids). He had no suggestions. Does anyone else?
juju4 juju4 9 years
Before I was married, I claimed "single -1". I received a decent sized tax return from state and federal. Once I got married, I claimed "married -1". My paychecks increased immediately, but I thought it was because of tax breaks for married couples. I now find out that I owe CA almost $700! It blows! The W4 is way too confusing, and most people just learn from trial and error to just pick a number.
hotstuff hotstuff 9 years
"Revise your W-4 so that you're having the correct amount of taxes withheld" I think the problem is so many of us don't know how to figure out if we are having the correct amount withheld. The link did help a little bit though, thanks.
amers230 amers230 9 years
i just don't get how they're taking out more taxes than they should. i always put a 0 on my W2, should i be claiming any exemptions or something? gah, why do i find this so confusing? lol
McCubcakes McCubcakes 9 years
I hadn't even thought about it this way. It's so difficult for me to put money back into my 401K, even though I know I should. This is definitely an idea to boost me to do it.
SkinnyMarie SkinnyMarie 9 years
Your making me think too much for today. I need some light hearted news, and maybe an espresso.
princessjaslew princessjaslew 9 years
i'm actually going to put all the money that i get back from taxes towards a IRA savings account. the way the economy is going, i'm too scared to invest it.
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