Wednesday, July 2, 2008

On Taxes

When I filled out my W-4 in mid-June when I was hired, I followed the instructions given. Therefore, I gave myself 2 Federal allowances and 1 State allowance since my filing status is Single. I had used a paycheck calculator to get an idea of what my net pay would be. However, I had only been putting 1 allowance for each income tax on there, so I was nicely surprised when I received my first paycheck and the net pay was about $100 more than expected!

I did a bit of research regarding how a person should fill out their W-4 if filing as Single. Basically, I found out this: if you claim your Federal allowances as 0, you will get a large refund which means you had more taxes withheld during the year. If you claim 1, you will get a small refund. If you claim 2, you will either break even or owe a small amount. I called my Dad and asked him what he would suggest, and he said he pretty much never breaks even and said either 2 or 1 is fine.

Would you rather get a refund or owe a little bit to the IRS? How do you file your taxes?

4 comments:

Penny July 3, 2008 at 11:17 AM  

That is a good question! I don't even remember what I put! I will have to look into this, but I believe I put 1.

asgreen July 3, 2008 at 2:35 PM  

I would rather get a refund, no matter how small. It is just such a great feeling to get a check in the mail from the IRS.

graduatedlearning July 3, 2008 at 7:59 PM  

even though lots of pf bloggers say that they want to end up owing (so they don't give a "free loan to Uncle Sam", I would prefer getting a refund, as I wouldn't want to have to pay a penalty for trying to keep too much of my money. I can't remember what I listed, but I'd probably put 1 or 2.

MP July 5, 2008 at 8:00 PM  

Hi -

I found your blog via Krystal's "Give me back my five bucks" blog. First, I'm going to add you to my "favorites" list and blog roll .

Now, to answering your question -- while many people say arranging the W-4 so that a refund can be guaranteed at year's end is like giving the government an interest-free loan, I don't mind. I enjoy the yearly infusion of cash (it ranges between $3,500 and $4,000) which I will either throw into my IRA proactively for the coming year OR purchase myself a nice gift or vacation.

I've done this for years. Why? The first year I was married, when my ex and I were filing our first joint tax return, we owed taxes. He worked on Wall Street and didn't plan correctly and I had to write a check for over $80,000 on April 13. I wasn't to happy with my new husband and following that experience we met with a great accountant and tax advisor to make sure I would never have to write a check to the IRS again.

If I have my choice between giving the government an interest free loan for a few months or writing them a check at the end of the year, I'll go with loaning them money.

Morphine Princess

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