Are the number of dependents you claim correct?

This time of year, millions of Americans find themselves wondering how they're going to pay for all of the items on their holiday shopping lists. Perhaps you considered charging your purchases on a credit card and then paying that card off with your tax return. But wouldn't it be nice if you had that money already? Sure, you could go to a service that gives you money now for the refund check you're expecting... but the fees involved can take a hefty chunk out of your refund.IRS Bean Counter calculator for free, which lets you see how a change in withholding will affect your paycheck.

So how can you plan ahead next time?

When you think about it, getting a refund check means that you let the IRS use your money throughout the year without paying you any interest. Wouldn't you rather have the money during the year yourself?

Here's how you do it. The IRS allows you to increase the number of dependants on your W-4 withholding form, meaning that less will be withheld for taxes from each paycheck. In the past, if you claimed greater than nine dependants, an explanation and approval may have been required. But the IRS has lifted this restriction, allowing you to voluntarily increase your dependents claimed.

This lets you have more money in each paycheck instead of "loaning" the money to the IRS and having to wait for a refund.

But don't go overboard. You should only lessen the periodic tax withholding to match the expected refund. This way you are taking your refund as you go; instead of letting the IRS hold on to it.

Believe it or not, the IRS actually makes it easy to calculate!

The IRS offers a nifty

Take advantage of this calculator today to see how changes can impact your take-home pay.

10:55 AM - Jan. 20, 2009 - comments {0} - post comment

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