October 14, 2006 7:56 PM
How To Minimize Your Tax Bill: Get Next Year's Tax Refund Now
You don't have to extend an interest-free loan to the government. By carefully deciding the number of withholding allowance you claim on the W-4 form, you can get your next year's tax fund now today to help your cashflow.
From MSN Money:
Signing the W-4 the first time doesn't lock you into one set of allowances forever. In fact, federal law requires your employer to let you change your allowances at any time.
...
The advantages of reducing your withholdings can be significant. If you're single and earn $20,000 a year, one additional allowance that you claim reduces the withholding taken from your salary by about $40 a month. That adds up to $468 a year. With five additional withholding allowances, you have an additional $2,300 every year in your pocket.
Understand that reducing your withholdings does NOT reduce the tax you have to pay on April 15. (Or more correctly for the 2006 tax return you will file in 2007 -- April 17.) What it does do is put more money in your pocket now, rather than later in the form of a big refund.
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