Extra Money Taken From Paycheck?

Question

I have an additional $10 taken from my paycheck every week. I know it would be better to save it where it could earn interest, but I'm terrible at saving money that I have available.

I was fine with this arrangement until my sister told me that I may not get the money back when tax season rolls around. If I don't owe the IRS any money, everything that was taken out I will get back, right?

And is this extra money taxable as well, or will it be left completely alone unless I owe money?

Answer 1

Sister is not correct. If you are owed a refund, you will get the money, unless you owe the irs or someone else (like your state) money. If you're having an extra $10 withheld each week, then you'll get an extra $520 refund next year more than this year. The extra money is not taxable. Federal tax refunds are not taxable ever.

Answer 2

You are probably entitled to at least three withholding: Yourself; head of household; one dependent (four if your wife does not have a job). Although it is not illegal to add more, the IRS may ask for proof of such, but only if you receive a substantially larger refund than you normally would. However, since you will, ultimately, pay more taxes for the money you received, this is probably not a good strategy (most people think that they can put the non-withheld money into a savings account, and thus "make" money on the interest, but, in truth, the under 3% that a high-end savings/checkings account would give you is probably not worth it, not to mention that you'd have to pay taxes on the bank interest!!!). Instead of adding deductions, consider putting a "minus" amount on the W-4 line that reads "Additional amount, if any, you want withheld from each paycheck". For example, putting "-500" means that you want to receive an additional $500. But, be VERY careful with this, because if it exceeds the ordinarily withheld amount, it will trigger LOTS of alarms with both your employer and the IRS (BTW, you should be able to do the same with your State W-4, if applicable). You shouldn't risk potential penalties (and even jail time, should the IRS and your employer consider it "fraud") just to put more money in your pocket. A far better method to all the above is to simply control your spending with a good budget. I know it's easier said than done, but if you haven't written down your income and expenses, and calculated your monthly payments - - which, BTW, is exactly what should have been done when you bought your property; your bank or legit mortgage company would have insisted on it - - then do so, NOW, and try to live within those constraints. The link, below, is an IRS guide to properly adjusting your withholding. Good luck!

Answer 3

Is the $10 extra being taken for federal income tax withholding? If you have no tax liability for the year, then you'll get back all the money that was withheld. If you do have tax liability, then if you paid in more than your total liability, you'll get back any extra.

The only way you wouldn't get it back is (1) if you didn't file a return - and you have control of that; or (2) if your tax liability is more than you paid in - if that happens, the extra $10 amounts would go toward paying what you'd otherwise owe at tax time.

Your gross pay, before deductions for withholding, is taxable. A refund is NOT taxed - it's just giving you back your own money that you already paid the tax on.

Answer 4

Hi there, in your question, you did not say "why" the extra $10 was taken out. Was that money earmarked for your 401K, company savings account or incentive program, prepaid vacation, prepaid health care savings account? You didn't say.

Your sister is right in the sense that if that $10 is taken out pre-tax, then it wasn't taxed to begin with.

If you are 100% certain that you are paying all the taxes you owe upfront (and I mean 100% certain), then you will get any overage you paid back when you do your taxes, but not including the $10 per month extra that was a pre-tax deduction.

If you have any further questions, you should call the IRS directly. I have called in the past and they have been helpful.


Live Telephone Assistance IRS.GOV
Monday – Friday, 7:00 a.m. – 10:00 p.m. your local time (Alaska & Hawaii follow Pacific Time). When calling, you may ask questions to help you prepare your tax return, or ask about a notice you have received.

Telephone Assistance for Individuals
Toll-Free, 1-800-829-1040.

Answer 5

You are giving the IRS your money to use....stop...put the money aside yourself, for you, not them!!!! Don't you go to a bank to cash your check? Well then do it then, throw it in a savings. Doyou have automatic deposit? your bank can set up an automatic savings as well!

Answer 6

You should get a refund . Whatever you got last year plus the extra 10.00