Do you have plans for spending your next tax refund? If so, what we are about to tell my shock you. Some people use their tax refunds to pay off some of their debt. Others to buy something they have been saving for or perhaps take a mini-vacation. Do you already have plans? If so, you are like most American in that they look forward towards getting that check from the federal government to go out and buy whatever they want. In fact, many people such people get large tax refunds every year, and get excited about receiving this so called “free money” from the IRS each year.
What they fail to realize is that a large tax refund is not a reason to celebrate. The money is not a bonus paid to you by the government or “free money” you receive for paying your taxes on time. Your income tax refund comes from your very own pocket. It means that you have been giving the IRS too much of your money each month without getting any interest from them in return.
The truth is that you could probably use the extra money you are paying to the government all year to pay off your debt quicker, start investing, or even to have more money to live on right now. Why not let your money work for you by receiving a larger paycheck each week instead of letting the IRS borrow it all year for free?
You can easily give yourself a tax-free raise, sometimes up to as much as $300-$400 each month, by reducing the amount withheld from your paycheck. All it takes is filling out a simple piece of paper called the W-4 form. You filled out one of these forms when you were hired by your employer. Therefore for debt help & tax refunds look no further.
If you receive a large tax refund, ask your employer for a new W-4 form and adjust the number of withholding allowances you are claiming. When you add allowances to your W-4 form, your paycheck gets bigger because less tax is withheld. When you reduce the number of allowances, your paycheck gets smaller because more is withheld. You may legally add any number of allowances to your W-4 forms that will allow you to break even with the IRS. This way, at the end of the year, they will not owe you any money and you will not owe them any money.
The IRS provides most forms and publications on their website. You can download a current W-4 form from www.irs.gov. Simply go onto the IRS’s website, and click on the tab at the top that says “Forms & Pubs.”.
The worksheet included with the form is helpful in determining the correct number of allowances you should claim, however the basic formula for calculating how many allowances to claim works like this. For every $2,000 in tax deductions you already have or create (such as business expenses, mortgage interest, medical bills, etc.), you should add one additional allowance on your W-4. Update your W-4 as often as necessary as your financial situation changes.
Keep in mind, if the number of allowances to which you are entitled decreases, you are required to file out a new W-4 within 10 days. However, if the number increases, no one is required to notify you. You are responsible for making the determination of whether you should adjust your allowances. If you have any problems figuring out your withholding and how many allowances you can claim, consult a tax advisor for help.
Finally, if you can adjust your allowances and increase your paycheck, the next question to ask yourself is what should you do with the extra money? We suggest that you use it to pay toward your debt reduction program. This way you can get your unsecured debt paid off as fast as possible.
Remember, Nationwide Debt Reduction does make any extra money if you pay off your program faster… however it will help you get through the program more quickly. You will be able to move on to paying off your secured debts and become one step closer to your goal of being debt -free.
To learn about this post, or if you are in need of help regarding your debt, please feel free to contact Nationwide Debt Reduction, Inc. (NDR) toll free at 1-800-890-6658. Our professional advisors will be more than happy to answer your questions. If it is after hours (8:00 am -5:00 pm PST) (11:00 am – 8:00 pm EST) you may go onto our Contact Us website by clicking here, fill out a short form, and one of our advisors can get back to you when it is most convenient for you. We are located in the city of Mesa, Arizona in the Phoenix metropolitan area.