Don’t Overpay your Income Taxes – Thrifty Tips Thursday!

And today’s Thrifty tip is to not overpay your income taxes! If you find that you are getting back a large amount of money this year then alter your withholding so it is closer to $0 next time.

If you like the windfall at the end of the year than try opening up a savings account and have money taken out of your check automatically each pay period. Have that sent to your savings account and don’t touch it until “tax” time. This way you will get your windfall payment plus interest (and it is there in case you need it for an emergency).

If you pay debt with your income tax return then you are getting an even worse deal. Consider this: say you are getting $1000 back on your return and you pay down a credit card at 15%. If you had adjusted your return so you would get nothing back then you would have had an additional $83 in your paycheck each month. If you used that to pay down the same debt (instead of the $1000 windfall) you would have saved yourself $75 in interest payments.

It may seem like a small amount, but every little bit counts. If your return or interest rate is higher then you will save even more money by adjusting your return.

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