Are you like thousands of Americans that THOUGHT they would get a return on their 2010 taxes but were shockingly surprised to see that you OWED money?
Simple reason: they changed the withholding tables last year so LESS was taken out of each paycheck than normal, for the same amount of dependants!
Example: in 2009, with 3 dependants, you might see $130 taken out of each paycheck for Federal withholding. In 2010 that dropped to $90.
We saw this and changed my hubby’s form to read “1”, when it should have said “3”. (I am self employed with Tupperware and have no such form…) That number tells them to take out LESS from the check as you have more mouths to feed, the higher the number is.
A little more was taken out of each of his paychecks in 2010 and we didn’t mind. Interest rates for savings accounts were less than 0.5% — it didn’t really cost us anything for Uncle Sam to have that money instead of it being in our bank accounts!
End result: We are getting over $4,500 back from the government this year! (Yes, it really pays to have a home based business – those extra Office-In-The-Home deductions add up fast!)
This is a painless way to save for our little peanut’s college! That money goes right into her 529 plan (or Edvest). We never saw it, so it’s an easy way to tuck it away! We know we can only deduct the first $3,000 – but that isn’t really our concern – making sure she is able to get a good education and not have to work during school so she can focus on her studies is!
What else could we have done with that money?
- Paid off a credit card (if we had one with a balance…)
- Added it to retirement (we have his boss put $$ into his 401K off the top of his paycheck…and I fund my IRA myself)
- Added it to the vacation fund (which is already almost fully stocked for this summer)
- Donated more!
You get the idea.
If you felt a pinch this year, check your withholding table and switch things up before it’s too late for next year. They recently changed the Social Security withholding too – taking out approx 2% less of your check now – so you shouldn’t see a huge change in your normal check with the simple switch.