If you usually get a tax refund, why not make this the year to stop giving Uncle Sam a free loan? The IRS withholding calculator, now updated for 2008, helps you estimate how much you should pay in taxes. It just takes a few minutes, so run the numbers and then compare your results with the amount that’s being withheld from your paycheck. If you’re having too much taken out, ask your human resources department to make an adjustment.
If getting a refund helps you build savings–meaning that your refund check goes straight into a savings account via the direct deposit option on your tax return–it’s not such a bad thing. But you’ll make a bit more interest by taking that money in income each month and having it automatically deposited into an interest-bearing account.
While overpaying on taxes is not the best move for most people, taking out a “refund anticipation loan” is not a good move for anyone. I was in a Wal-Mart today and was dismayed to see a Jackson Hewitt tax preparation service table with a sign boldly promoting, “Money in Minutes.” Within an hour, shoppers could get a high-interest loan against the value of their anticipated refund. Attention Wal-Mart shoppers, never, never do that. I sent a friendly note to Wal-Mart customer service suggesting that offering such a disservice to their customers hardly lives up to their tag line, “Save money, live better.”
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