Double Your Take Home Pay, Correct Withholding

Jan. 04, 2011 5:20 pm cst, Updated August 08, 2014

Increase Your In-Pocket Money, for US Taxpayers

Credit cards are not for emergencies, but a way to get people pay a bank, for using their own money. Those who are well-off enough, not to "need" credit, and can pay off their balances each 21 days. They are in the minority.

This information offers an alternative to living on credit cards. What would you do if I could show you a way to increase your in-hand money each year interest free?

Maybe the reader can forgive me on showing the negative spin of using credit cards. This will hopefully allow you to consider paying yourself, with this way of withholding your income.

This advice, if taken, will increase weekly, or month take-home income.

  • Are we talking a second job?
  • Turning the children into the slave trade ?
  • What do we have to do now?

What does a U.S. Taxpayer have to do?

It is important that each fiscal or tax year, is reviewed by the individual taxpayer to make sure that they are withholding around 90% of the their last years taxes, or estimated tax liability.

For first-time tax filers in the U.S., you get a break, because as a taxpayer, you are starting from scratch, not sure of what should be withheld from wages, tips and bonuses.

Withholding

US citizens loan money interest free, while paying 21% interest through the year, this turns out to be a double loss, and twice the financial burden.

The IRS can fine taxpayers for over withholding. It is not the US Treasury who asks you to over withhold, it is just another one of those ideas that somehow became a common practice.

I have done the taxes of thousands of taxpayers, and almost each person who over withholds, is in credit card debt. The then come to these tax offices offering bank products; a loan of their projected IRS Refund. The higher the refund, the more the loan costs. These loans are up to 300% interest.

The optimal withholding should be 90% of your projected tax liability. In other words, my earnings last year were $17,000.00, after all my deductions and exemptions, my tax liability was around $545.00. I withheld $1,500.00, so I got a refund of around $900.00. I based my withholding on making $24,000.00. It did not happen, but I did withhold at least 90% of my previous years tax liability. If I would have known that I only owed $545.00 I would have been able to spread the $900.00 out over 52 weeks I would have had an extra $17.31. That may not seem like much to some people, but it could have been gas money, or extra needed for essentials.

Wealthy investors often do not withhold or pay their tax, fine, and liability until the very last minute, because they USE THEIR OWN MONEY! They are not paying interest, and they sure are not loaning their spending power to the US Treasury.

Those who are eligible for Earned Income Credit, can also get that extra on their paychecks each week, or however often they are paid.

US Taxpayers suffer in debt all year long, when they have the availability of the money they are over withholding interest free.

An over-simplified table for completing the W-4

 
 
 
For one single person
Claim "1"
exceptions for Individual income(s) over $93,950.00
For a married couple
Claim "2"
over 100,000 there are exceptions
How many people are in your household?
Claim that amount of people
over 100,000 there are exceptions
Over withholding to get a big tax refund at the end of the year, is giving a FREE LOAN to the US Treasury, Interest Free. Is the credit you live on to overcompensate free?

US taxpayers loan money to the U.S. Treasury

Throughout the year, taxpayers are giving interest free loans to the US Treasury department. Then taxpayers/consumers paying 26+% interest through the year.

Many US Taxpayers who are over-withholding taxes on their income, are living on credit, and paying credit card interest.

This does not make sense.

Open a savings account, withhold the correct amount, and use your own money, interest free. No credit card needed. No 20+% interest payments for the rest of your life.

Tax Law Changes, Tax Forms, and Withholding

Click thumbnail to view full-size
Tax Forms, finding the right one, and knowing what the heck they want.Withholding at 90% of your tax liability makes it almost even by the end of the fiscal year.Which form is the right form? For tax withholding it is a W-4. Available on www.irs.govLilly is single, she claims one deduction for herself.Withhold within your projected tax liability. Publication 17 www.irs.gov has tax charts.
Tax Forms, finding the right one, and knowing what the heck they want.
Tax Forms, finding the right one, and knowing what the heck they want. | Source
Withholding at 90% of your tax liability makes it almost even by the end of the fiscal year.
Withholding at 90% of your tax liability makes it almost even by the end of the fiscal year. | Source
Which form is the right form? For tax withholding it is a W-4. Available on www.irs.gov
Which form is the right form? For tax withholding it is a W-4. Available on www.irs.gov | Source
Lilly is single, she claims one deduction for herself.
Lilly is single, she claims one deduction for herself. | Source
Withhold within your projected tax liability. Publication 17 www.irs.gov has tax charts.
Withhold within your projected tax liability. Publication 17 www.irs.gov has tax charts. | Source

Free IRS App - IRS2GO

One final note...

During your income earning year, whether it is earned income or investment income, there are two important things to know and keep in mind.

  1. If your income increases, decrease or you win a settlement or large sum of money, it is time to go back to the withholding calculator on the irs website, you can print off a new W-4 at anytime, and submit it to your employer so they can adjust your withholding up or down.

  2. Bonuses and other lump sum settlements are usually taxed at 40%. If this happens, it is a good idea to adjust your withholding and withhold less taxes throughout the year, unless you have had a substantial increase in income, winnings, or any other taxable income. This will keep more money in your pocket, while covering your tax liability.

© 2011 Lori J Latimer

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Comments 17 comments

chan0512 profile image

chan0512 5 years ago from Camarillo, CA

Great advice about Tax! No more free interest loan for fed. Thanks for sharing this article!


LillyGrillzit profile image

LillyGrillzit 5 years ago from The River Valley, Arkansas Author

@chan0512, Thank you for being the first to comment. Thank You! I thought you would agree. The very best friend.


okmom23 profile image

okmom23 5 years ago from Midwest, U.S.A.

Great article regarding the current tax situation and tips! Voted up!


LillyGrillzit profile image

LillyGrillzit 5 years ago from The River Valley, Arkansas Author

okmom, Thank you for giving this a read, and your nice comment and vote! :0) Thanks again.


MartieCoetser profile image

MartieCoetser 5 years ago from South Africa

Lilly, for the past twenty years I’m allergic to the receiver of revenue. Serious. I will provide all the needed financial statements, but don’t ask me to complete those tax forms. I literally get an anxiety attack when I touch those forms. Too many years in business, too many battles with Sir Tax, and not only my own battles… I had a bookkeeping business at a time, besides other businesses, and part of my service was to file my client’s taxes. I know filing can now be done via internet and it is not as complicated as in the past, but I don’t even have the desire to look at it. I don’t even know how the tax Laws had changed during the past 20 years. Thank heavens for professional tax filers. Enjoy!


Granny's House profile image

Granny's House 5 years ago from Older and Hopefully Wiser Time

Lilly, I have to come back later and read better. Have to go play with my g-daughter now. Will bookmark

peace chicken grease!


LillyGrillzit profile image

LillyGrillzit 5 years ago from The River Valley, Arkansas Author

@MartieCoetser, I totally understand. This is why I am a full time writer, and not working in taxes. As an empath, I counted the job as a sort of ministry, because of how stressful and gawdawful it is to come to the tax table. I still help people sometimes that Creator puts in my path or the IRS sends my way. As Benjamin Franklin said, the only certain things are Death and Taxes", and they are both brutal. It is like people go through Mourning stages, 1).Denial/Isolation, 2).Anger/Shock, 3).Bargaining/Guilt 4).Depression, 5).Acceptance. It is too much. Thank you for the read and great comment.


LillyGrillzit profile image

LillyGrillzit 5 years ago from The River Valley, Arkansas Author

@Granny's House, Grands always come first! Thank you for the read and Bookmark. It can help a lot of people, in my opinion.


katiem2 profile image

katiem2 5 years ago from I'm outta here

You have a great head for finance! Thank you for the very helpful tips on how to stop paying interest. There should be no more interest free loans as we have learned better we should do better.

Oh the many types of loans. I'm just gonna avoid loans unless a complete and total neccesity!

Well done! :) Katie


LillyGrillzit profile image

LillyGrillzit 5 years ago from The River Valley, Arkansas Author

@Ms Katie, Thank you for your comment. This is hoping more people will take advantage of their spending and earning power, and not trade it for debt. The very best. You will soon be so wealthy, that if you get a loan, it will be at your advantage, and you will be able to PIF before the first drop of interest!!! :0)


nextstopjupiter profile image

nextstopjupiter 5 years ago from here, there and everywhere

We don't need money, when you earn money you have to pay taxes, when you spend money you have to pay taxes, and what happens with all that tax revenues? Those who collect the taxes spend the money on supporting the criminal financial system. I live almost without money for eight month now, working as a volunteer for free food and accommodation, and I don't have to pay any taxes, a wonderful life! Let's turn the big banks into big bangs, and peace will come!


LillyGrillzit profile image

LillyGrillzit 5 years ago from The River Valley, Arkansas Author

@nextstopjupiter, You are right on! We are taxed to death. If we have no income, just food and shelter, we pay NO Taxes! Peace to all of us! Thanks for the visit and comments!


always exploring profile image

always exploring 5 years ago from Southern Illinois

Lilly you are a God send I'm scared to death of the word I.R.S.Thank's for all the really good info.

Cheers


LillyGrillzit profile image

LillyGrillzit 5 years ago from The River Valley, Arkansas Author

@always exploring, Thank you very much for the read, and comments. I am glad this helps. They used to be a lot meaner, until after what happened to Willie Nelson. There are many ways taxpayers can request assistance, request an Offer in Compromise (OIC), and even dispute the findings (with proof) and be given legal assistance.


LillyGrillzit profile image

LillyGrillzit 5 years ago from The River Valley, Arkansas Author

~disclaimer~ This is only advice, seek the advice of a certified professional before taking the advice of any on-line, unverified source.

To Hubbers only: if you have tax problems in the US that you would like some free advice. I will be glad help you find answers, and to direct you to any help possible. without any charge. :0)Confidential and with due diligence.


Peter Owen profile image

Peter Owen 5 years ago from West Hempstead, NY

True. Most taxpayers overwithold. On the other hand, many use this as their savings medium and if they didn't they would just spend the extra dollars in their pocket during the year. Financially, your suggestion is better.


LillyGrillzit profile image

LillyGrillzit 5 years ago from The River Valley, Arkansas Author

Thank you Peter, I am just no fun. :0)You are correct.

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