Maximizing Your Personal Tax Allowance & Decreasing Taxes

Simple changes on your W9 are sure to maximize your personal tax allowance and keep money in the bank, rather than letting it earn interest in Uncle Sam's pocket. Taking the proper withholdings will ensure that you bring home the most in your paycheck and that you are not writing a large check to the government come April 15th. A little simple tax planning can keep you from getting a large refund. Sure, a refund is never a bad thing. However, if you have that money every month, YOU can earn interest on it! 

There are a few steps that you will need to follow to make sure that you are calculating these often cryptic numbers accurately.

You’ll need:

  • A new Form W-4 from your employer
  • Access to a tax withholding calculator – these can be found at the IRS website.  
  • A copy of your Form 1040, Form 1040A, or the Form 1040EZ from the previous year.

STEP 1:

Locate the withholding calculator on the IRS website and answer the questions provided, including information from your previous year’s tax return. You may find that you should claim fewer (or more) exemptions on your W-4 to benefit from either having your earnings now, or in some cases, having less in your paycheck, however getting off scot-free during tax season. 

STEP 2:

Complete the new W-4 with a deduction for yourself, one for your spouse, and one for each of your children. Be sure to update the exemptions on your W-4 each time there is a change in the number of people in your family. You can complete the same process to reduce the number of withholdings that you are taking in order to save yourself from owing when you file.  

STEP 3:

Decrease your effective tax rate, now that you have maximized on your exemptions. Make the most of your return by taking the tax breaks that you deserve. Consider all charitable contributions that you have made during the year. Include donations as school supplies, purchases as fund-raisers, and monetary donations. Do not overlook work related expenses!  Purchases and bills related to work, such as a portion of your cell phone bill, travel expenses, and in some cases, a percentage of your mortgage, if you have a home office, can be written off. 

You may also be able to benefit from other tax benefits through your employer, such as participating in a pre-tax flexible spending plan for medical expenses or child care expenses.  Investigate the availability of a retirement plan, Roth, 403-B or other plan that reduces your taxable income, while benefiting you. 

 

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