Did you get a huge refund or owe a large amount in taxes this year? Either way, it’s a great time to adjust the amount you are currently withholding from your paycheck for taxes.
Most Americans have too much withheld from their paychecks, which results in large refunds at tax time. Studies show most people prefer huge tax refunds, even though most financial experts say it’s not a great idea because it allows Uncle Sam to use your money, interest-free. Instead of getting a big tax refund, many families could benefit from getting a smaller refund at tax time and bigger paychecks throughout the year. On the flip side, having too little money withheld definitely isn’t a good idea. If you under-withhold taxes during the year, you could face a penalty from the IRS.
Here’s a handy calculator to help you determine if you are having the right amount of taxes taken out of each paycheck. Remember, you can adjust your withholding at any time during the year. Questions about withholding? We’re here to help you.