Article
TAX TIPS
TO KEEP MORE
MONEY IN YOUR POCKET
Question: What three words do people least want to hear in the we finally file a week or two into April. You can file now and have
middle of a recession? (Besides “You’re laid off,” that is.) Answer:“It’s refund money in your bank account within a few weeks. Thanks to
tax time!” Yes, by now you should have your W-2 in hand, and you’re e-filing, there is absolutely no reason to wait until April 15th. If you
already dreading having to file. Tax season isn’t all bad news, says e-file either by using a website or DIY taxes computer software, you
financial counselor and bestselling author Eric Tyson. Even if you’re can set up your refund so that it is direct deposited into your bank
not expecting a fat refund check, the looming presence of April 15 account.
can inspire you to make some changes that will keep more of your
cash out of the clutches of the IRS—now and in the future. “Usually, your refund money will go into your account in about
ten days, great news for cash-strapped households who are
“Many people have had a tough year,” says Tyson, coauthor making the most of every penny right now,” notes Tyson. “The
along with Margaret Atkins Munro and David J. Silverman of Taxes flipside, of course, is that if you know you are going to have to write
2009 For Dummies®. “Americans have faced job losses, pay cuts, a check to the IRS, you might as well wait as long as possible to file,
foreclosures, and constricting budgets, and now, here comes Uncle because you can hold on to the money just a little longer.”
Sam with his hand out! But the good news is that a smart tax
strategy can help you keep more money in your pocket right now If you’re thinking about buying your first home, now might be a
when you need it most.” good time to take the plunge. Home ownership has always yielded
tax benefits for smart, sensible buyers. Check the details of the
Tyson has some advice that will allow you to cross “taxes” off of Economic Stimulus Package for first time home buyers’ perks.
your list of worries and even help you put some money back in
your pocket right away. Here are a few of his tips: “While I would never recommend that anyone make
such a big decision for tax benefits only, I do feel that if
Revisit your withholdings. Do you dread April 15th because you’re financially and emotionally ready to buy, now is
it means you have to dole out a huge check to pay your tax the time,” says Tyson. “Property prices and mortgage
bill? Or maybe you have to skimp and save throughout the rates are low and of course your interest on mortgage
year but then get a big tax refund when you turn in your taxes? payments is tax deductible. The fact that you might get
Either way, you need to adjust your withholdings. You can do a tax credit is just icing on the cake.”
so by filling out a Form W-4—one of the many forms you
filled out on your first day at your job and probably It can’t be said too often: Fund your
haven’t thought about since—and turning it into retirement. When you funnel your savings
your employer. You’ll see an adjustment in how dollars into retirement accounts, such as a
much you’re bringing home on your paycheck 401(k), 403(b), SEP-IRA, Keogh, or IRA, you can
within a month. earn substantial upfront tax breaks on your
contributions. Tyson says you might even
“If you or your spouse has recently lost a job, consider investing your tax refund check
changing your withholdings might put some extra there. And please, he adds, don’t let
money in your pocket—especially if one of you worries about the stock market’s ups
has been withholding too much,” says Tyson. and downs dissuade you from making
“Just be sure that your withholding smart, long-term investments now.
matches your tax liability. Adjusting
your withholding just so you get Investigate itemizing. If you’ve
more out of a paycheck isn’t a looked at itemizing your taxes as
good idea if you’re not prepared to too much trouble in the past, now
pay the bigger tax bill when your taxes is the year to start. You might be
come due next year.” surprised what a difference spending a little
more time on your tax return can make. The IRS
Be a fast filer. Too many of us get our W-2s just gives you two methods of determining your total
after the new year begins and hold on to them until deductions and you get to pick the method that
118 March 2009 |
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