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Are You Holding Back?

The US tax system is very hard to understand. With the pages and pages of rules and regulations that not only change every year but have different guidelines for different circumstances, it’s no wonder becoming a CPA requires a Masters Degree as well as passing a really tough test.

While very few of us tax-paying Americans understand everything there is to know about IRS tax code, most of us DO know this: April can mean tax-return time. But, do we really comprehend just what is meant by a tax return? I’m willing to bet we do not.

In order to get a tax “return,” one must first OVERPAY taxes. Many citizens don’t make enough money to owe any tax and had none withheld from their paychecks all year long. If they get a payment from the government during tax-return time it’s technically not a tax return because it's not an overpayment of taxes. But, I will leave that explanation for another time.

I am speaking particularly to those who have had taxes collected from their paychecks, and have, in fact, overpaid taxes during the calendar year for which the tax return documents are being prepared, and have or will receive a refund of said taxes. To you hard-working individuals–you are loaning the government money INTEREST FREE during the year. That’s right, it’s a loan. I’m sure you could probably use that money during the year, am I right? In my opinion, it’s better to owe the government a little bit on April 15 than to get a huge refund. So, how does one fix this?

Speak to your employer’s human resources or payroll department and see what you need to adjust on your W-4 (NOT the W-2, which is the document your employer sends you in January stating what you made and had withheld) to have less withheld from each paycheck. This will put more money in your pocket every month.

And I can certainly tell you what to do with that!

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