Frugal Friday:: Are You Loaning the IRS Money?

I have always wanted to participate in Frugal Friday, but never really felt like I had much to contribute despite the frugal lifestyle we lead. Until now :)

Did you get a good-sized refund at tax time? Did you ever stop to think about how much money that could mean for your checkbook monthly?

After listening to Dave Ramsey (if you don't know who he is check out the link!) I did the math.

Our $4,000 refund would translate into $333 a month! But how do you get that money upfront rather than loaning it to the IRS so they benefit from the interest earned?

Adjust your withholding allowances on your W-4!

DISCLAIMER: I am not, nor have I ever claimed to be, a tax professional. I do not know what your individual situation is and if you need to, please seek the advice of a competent tax professional.

You can go to the IRS website and use their extremely complicated and lengthy calculator to help you figure out the proper amount of exemptions, or you can use the ever-so-simple calculator from Kiplinger.com to figure it out.

Does the thought of tinkering with your withholding scare you? I sure was a bit reluctant! Until I decided that the extra $300 we got would go into a savings account. (We have been very happy with INGDirect.com ) If our withholding calculations are off, we'll have what we need to pay the IRS! If we aren't wrong and we still get a minimal refund, we've just saved $4,000!

Don't loan the government money interest-free...earn the interest yourself!

Most people don't think of adjusting their withholding except for when job changes occur or members are added to the family. However, upon perusal of the W-4 form, the IRS states:
"Consider completing a new Form W-4 each year and when your personal or financial situation changes." (Emphasis mine)

I think that's good advice! :)