Your tax withholding strategy

[DaFace]

Just a poll for random discussion now that tax season is rolling around again...

[Buck]

Well I got $900 back today ($570 Federal / $330 State)

I had 1 witholding for my Federal and 0 for state, and I've only been working since March 1st.

Also, my Federal was going to be $850 on its own just based on my W-2 from work, but in Jan 2012, I had nearly $1200 paid to me in unemployment compensation with no federal tax withheld on it so it brought me down to $570.

Anyhow, what is the best strategy for me to take the $37.50 a paycheck (every two weeks) extra that I was paying (possibly more, not sure based on the unemployment skewing things, might be more like $50 or more) as taxes and put it into some account where it will grow?

Not sure if my best option is to just put it in a savings account or what.

[Fire Me Boy!]

Originally Posted by DaFace

I know logically it doesn't make sense, but I tend to fall into category 1. I like getting a nice "bonus" each year that I can then use for big purchases all at once. It's like a forced savings account. Granted, a savings account that pays no interest, but it's not like interest rates are any good with others right now anyway.

The reason the question is on my mind is that, with the recent changes to our taxes, I'd like to not take a "pay cut" on a monthly basis due to the new laws, so I'm considering reducing my withholding a bit to make up for it. We'll see.

This is what I did, and your second paragraph is exactly why I changed my withholding. I still over-withhold, I just don't do as much.

[Saulbadguy]

Originally Posted by Buck

Well I got $900 back today ($570 Federal / $330 State)

I had 1 witholding for my Federal and 0 for state, and I've only been working since March 1st.

Also, my Federal was going to be $850 on its own just based on my W-2 from work, but in Jan 2012, I had nearly $1200 paid to me in unemployment compensation with no federal tax withheld on it so it brought me down to $570.

Anyhow, what is the best strategy for me to take the $37.50 a paycheck (every two weeks) extra that I was paying (possibly more, not sure based on the unemployment skewing things, might be more like $50 or more) as taxes and put it into some account where it will grow?

Not sure if my best option is to just put it in a savings account or what.

Do you have any sort of retirement account?

[El Jefe]

Originally Posted by Scorp

I typically owe $2500-$3000 every year. Why let the Government earn interest on your money?

Because anything I could put it into for such a short period wouldn't yield me anything worthwhile. I don't want to hassle putting it into a CD for 1% and a penalty for early removal. I have two accounts which would net me a whopping less than 1%, so I am not going to mess with it. I like getting a "bonus" so to speak every year. Just my opinion.

[El Jefe]

Originally Posted by Saulbadguy

Do you have any sort of retirement account?

Could you PM me a great retirement account to start up? My wife has a 403b through her work, but I need to set something up as well.

[Chief Roundup]

Originally Posted by Buck

Well I got $900 back today ($570 Federal / $330 State)

I had 1 witholding for my Federal and 0 for state, and I've only been working since March 1st.

Also, my Federal was going to be $850 on its own just based on my W-2 from work, but in Jan 2012, I had nearly $1200 paid to me in unemployment compensation with no federal tax withheld on it so it brought me down to $570.

Anyhow, what is the best strategy for me to take the $37.50 a paycheck (every two weeks) extra that I was paying (possibly more, not sure based on the unemployment skewing things, might be more like $50 or more) as taxes and put it into some account where it will grow?

Not sure if my best option is to just put it in a savings account or what.

Hmmm how are you getting anything back today when the IRS isn't accepting returns until the 30th of January?
Did the government go ahead and start taking them now?

[ChiefsCountry]

Pay my cpa to figure it out for me.
Posted via Mobile Device

[Dayze]

I recently (August '12) had a significant bump up in pay;
I don't have any itemized deductions; so I need to remove my standard deduction from our gross income, and determine wha the taxable piece is - then compare to our current witholdings.

We're gonig to need to really adjust our 401k contributions to lower the taxable income (which is a good thing!). I want to be as close to 0 as possible in terms of a return

[Buehler445]

Originally Posted by Chief Roundup

Hmmm how are you getting anything back today when the IRS isn't accepting returns until the 30th of January?
Did the government go ahead and start taking them now?

This is my question. I was of the understanding that you couldn't e-file until 1/31/13.

[Buck]

Originally Posted by Chief Roundup

Hmmm how are you getting anything back today when the IRS isn't accepting returns until the 30th of January?
Did the government go ahead and start taking them now?

TaxAct. California already accepted my return. Federal is pending.

[ChiTown]

Originally Posted by ChiefsCountry

Pay my cpa to figure it out for me.
Posted via Mobile Device

Precisely this.

My Taxes are mega-complicated, as I pay State Tax in 6-8 different states via my Partnerships. We set a strategy in January and follow the course throughout the year. If we need to adjust, we can do it, but generally, we stay the course.

[Dayze]

holy shit.

yeah....CPA route lol. That's insane

[DaKCMan AP]

Still waiting on some 1098 & 1099 forms, but I thought I was going to owe ~$50 this year but now it looks like I'll be getting a nice refund.

Didn't expect to get a tuition & fees deduction and I guess the IRS withholding calculator didn't properly adjust my taxable income due to pre-tax contributions to retirement & health accounts.

[alnorth]

Every January I reset back to the typical default withholding and don't think about it till October. In October I take a close look at what I've withheld and what I'll likely owe, then I adjust for the rest of the year.

I get the best of both worlds. The government does not get an interest-free loan, and I basically get a 3-month "bonus" during the holiday season when people sometimes need more money anyway.

Stop getting those huge refunds, give yourself a 3-month pay-raise at the end of every year instead.

[rageeumr]

I usually make pretty sound, logical financial decisions. This is the exception. I know it makes zero sense, but I like getting a big return.