How Much Tax to Withhold?

Most people pay the IRS throughout the year by having their employer withhold tax dollars from their paychecks. Your employer then determines how much of your hard earned paycheck should be withheld and sent to the government based on the W-4 form you filled out when you start a new job or at the start of each year. That W-4 form can be changed anytime during the year. For instance, if you started the year single and later married, you should change your filing status so that you will be able to take home a little more cash. (see IRS Publication 919 for more info.)

CPAs recommend that you should try to withhold at least 90 percent of what you think you will owe in taxes for that year but no more than that. If you withhold more than that, thats like giving the government a free no interest loan.

Myths about Tax Refund Checks
A tax refund check is not free money! It is your money that the IRS has decided to return to you because you overpaid on your taxes. If your tax refund tax is large, then that means you are having too much money deducted from your paychecks. You need to have that amount changed right away and used that extra cash to pay off debt instead of loaning it at no interest.

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