When you fill out your paperwork for a new job they give you the option to hold a set amount each paycheck for taxes. When you go to claim your taxes at the end of the year do you get the full amount you put into? Or do they tax that too? If they do then there would be no point to do that, am i correct?
2007-04-04 19:25:30 · 6 answers · asked by Brian S 1 in Business & Finance ➔ Taxes ➔ United States
You are required to answer the questions on the W-4 honestly. Tax law is based on the ability to pay so withholding is done so that everyone can pay at tax time. You do your taxes and what has been withheld can be applied to that amount owed. You can overpay and get money back or underpay and owe. Your gross pay is taxed and your withholding amount is based on that figure. The irs just holds it for you until time to pay and helps those that don't have the ability to have enough money to pay their taxes when the time comes. If you want to save, and it's a good thing to get started-the younger you are when you put it away, the more time it has to grow so that when you retire you have something. Everytime you cash your paycheck, put untouchable money in savings-whatever you can afford always. Great article written by Ben Stein on the att yahoo home page today about how to save. I should have listened.
2007-04-04 19:38:04 · answer #1 · answered by towanda 7 · 0⤊ 0⤋
At the end of the year, you calculate your tax liability for the year using a 1040, 1040A, or 1040EZ form. Then you compare your tax liability to the amount you had withheld. If you overpaid, you get the extra back as a refund - if you didn't have enough withheld, you pay the difference.
Using over-withholding as a saving method is not a good decision financially, although many people who find it impossible to save otherwise (since if they have the money, they'll spend it) use this way to save. Financially you're better off putting a little extra into an interest-bearing account each payday.
2007-04-05 04:39:06 · answer #2 · answered by Judy 7 · 0⤊ 0⤋
The money you get from a refund is not, in itself, taxable income. But, you don't get paid any interest, like you would if you put the $30/check into a savings account.
If you don't have anything unusual (meaning the only money you made is from the job), then you should only fill out the exemptions (1 for each dependent, 1 for yourself, etc.), and you should be close to even when you file your taxes.
2007-04-05 10:29:33 · answer #3 · answered by Anonymous · 0⤊ 0⤋
The withholdings are an advance payment on your tax liability. You may get something back if too much is withheld. If not enough is withheld, you'll have a bill to pay at tax time.
Income taxes are actually due when the income is earned, not when you file your return at the end of the year. You are required by law to have enough withheld from your pay to cover your total tax liability. If you don't have enough withheld you may have penalties to pay for undermayment of taxes.
2007-04-04 19:42:16 · answer #4 · answered by Bostonian In MO 7 · 1⤊ 0⤋
It isn't a good way to save money because you earn no interest. You will get back the difference between taxes you owe and the amount withheld.
2007-04-04 19:32:12 · answer #5 · answered by Rainman 5 · 0⤊ 0⤋
No one answered what I think is the other part of your question. No, they don't tax your federal refund. It was you money in the first place.
2007-04-05 04:46:00 · answer #6 · answered by CarVolunteer 6 · 0⤊ 0⤋