- Days left
how to minimize federal withholding from your paycheckThere may be a way to unlock some extra cash for the holidays right under your nose.

If you're getting a tax refund of more than $500 come springtime, it means you are giving the government an interest-free loan on your earnings. In 2011, more than 102 million people got average tax refunds of $2,805, according to the Internal Revenue Service.

While that's an excellent way to ensure you're saving some cash for big bills in 2012, you could plan to get a smaller refund and maximize your holiday-time paychecks instead. That could be the difference between staying debt-free and having a big credit card bill after the holidays.

This week, grab your your pay stub and W4 form, and find an online calculator to quickly re-examine the number of withholding allowances you're making and where you stand with your taxes. You might be able safely lower your withholding for December without creating a tax bill in the spring.

For example, if you are single and making $3,000 per month before taxes -- or $36,000 annually -- and have claimed no exemptions, then you're paying $391 in federal taxes every month, which is the maximum amount, according tax research specialist Lindsey Buchholz with H&R Block's Tax Institute.

But if you qualify for one exemption, that could add $46 more to your wallet. Two exemptions and that's almost $100 more a month. If you're single with two kids and haven't taken the maximum allowances, that could add up to an extra $185 in take-home pay.

She cautions that not everybody is in this boat. "If your situation is similar to last year and you got a bit of refund for 2010, then you can put more into your income," she says. But if you owed taxes last year, then don't cut your withholding, or you'll have a tax bill in April.

Revisiting your W4 is also especially critical if your circumstances changed this year. For example, you might have had a new baby, adopted a child, gotten married or divorced, or made new home purchase. Personal finance magazine Kiplinger's has a calculator that gives an estimate of what an additional allowance would mean for your take-home pay.

In one case I know of, a young guy, married in 2009 but with no children, realized months after starting a new job this year that his W4 had been mistakenly submitted as single with zero allowances. Using a worksheet, he figured out he qualified for at least two. That change boosted his monthly net income by 30% and allowed him to pay down high-interest credit-card debt left over from the wedding. Now, he also has a little more cash on holiday presents without sinking into more debt.

The more allowances you claim, the less tax is withheld. But again -- proceed with caution. This only works if you've been getting a nice-sized refund each year.

Check with your company's human resource department to make sure that your resubmitted form is processed as soon as possible to get the bump in your next few paychecks. If you want to return to higher withholding level at the start of 2012, you may have to submit another W4 after the new year.

Increase your money and finance knowledge from home

Introduction to Preferred Shares

Learn the difference between preferred and common shares.

View Course »

Goal Setting

Want to succeed? Then you need goals!

View Course »

TurboTax Articles

A Brief History of Income Taxes

Did you know President Abraham Lincoln, one of America's most beloved leaders, also instituted one of its least liked obligations - the income tax? In this brief history of taxes, see the historical events which shaped income taxes in the United States today.

What Is a Schedule M IRS form?

Note: The content of this article applies only to taxes prepared for 2009 and 2010. It is included here for reference only. In order to take the making work pay tax credit, the IRS requires you to prepare a Schedule M with your federal tax return.

Video: Tax Filing Requirements for Children

Depending on how much money they made during the year, your children may very well have to file for taxes. Learn about tax filing requirements for children with help from TurboTax in this video on tax tips.

Add a Comment

*0 / 3000 Character Maximum

3 Comments

Filter by:
Baby

Hey, I met a man who are 6'3" on a dating SITE-- Tal l H’U‘B. c○ m --.while, I am only 5'6" and I love tall guys. He said to me that tall girls on that site are seeking fun

with tall guys...Are you tall and like tall people, if so, go and check here~

January 04 2012 at 12:21 AM Report abuse rate up rate down Reply
cherry

You are not alone, find your soul mate on -- Tal lH UB. C○ m -- where many t al l s ingles who like dating and chatting there. I'm a tall girl from US, I also like dating with

t all guys on it. go on

December 30 2011 at 1:39 AM Report abuse rate up rate down Reply
intelligenceforrent

http://www.intelligenceforrent.com/

November 07 2011 at 7:40 PM Report abuse rate up rate down Reply
Jyjnhy

My best friend ,she just has announced her wedding with a millionaire old man Ronald who is the CEO of a MNC ! They met via ----SéêkSúɡárDαd.℃⊙M--.- ..it is the largest and best club for rich man date with young and beautiful woman and their admirers to chat online. …you don’t have to be rich there ,but you may meet one ,maybe you wanna check it out or tell your friends ! Giving the government an interest free loan is a patriotic thing to do .

November 03 2011 at 10:13 PM Report abuse rate up rate down Reply