WHY DID YOU LOAN $3,274.29 AT 0% INTEREST TO THE FEDERAL GOVERNMENT?
About three in four Americans receive a tax refund each year, averaging $3,000.00 The government kindly pays YOUR HARD EARNED MONEY back in the form of tax refunds. If I asked you to loan me $3,000.00 for 12 months at zero interest, how many would agree? Thank you, I accept!
My first job after college paid $20,000. I LOVED and NEEDED my federal and state tax refund. It was free money – Right? WRONG – You only receive a refund if you loaned Uncle Sam more money than you legally owed. Uncle Sam gets to keep your money for up to fifteen months at zero interest. Hey-it’s the government they are not really your Uncle!
OUR GOVERNMENT NEEDS EVERY DOLLAR IT CAN GET!
The U.S. Internal Revenue Service (IRS) needs this zero-interest loan. “Balanced against the value of its commercial assets, the federal government had a combined total of $103.7 Trillion ($103,658,000,000,000.00) in debts, liabilities, and unfunded obligations at the close of its 2019 fiscal year.” This amounts to ~$315,315.00 debt for every U.S. man, woman, child, and baby!
Keep these numbers in mind when you hear Politicians bragging about their generosity of spending another $1.9 Trillion- THAT WE DO NOT HAVE!
NO SUCH THING AS FREE MONEY!
A good friend and mentor taught me my goal is to owe and receive $0 taxes on April 15th. Err on the side of paying a small amount, so the government gives you an interest free loan. This means 75% of you need to adjust the number of dependents on your W-4 form.
HOW TO COMPLETE A W-4 FORM – SEE FORMS IN APPENDIX
A W-4 form tells your employer how much tax to withhold from each paycheck. Your employer remits the tax to the IRS on your behalf. {Remember Uncle Sam – My Least Favorite Uncle, ALWAYS gets paid first!
You probably filled out a W-4 when you started your job and can change your W-4 any time. Typically your workplace (Human Resources) can provide a Form W-4. I included the form in the appendix, or google W-4.
The W-4 form comes with an allowances worksheet to help you figure out how many dependents to claim. To get the most accurate tax withholding, resulting in almost ZERO dollars owed or due at tax time, answer the allowance questions accurately.
There is an excellent withholding calculator on the IRS website which will help you precisely determine your allowances and help complete the W-4 to meet your needs.
CONCLUSION – WHY DID YOU LOAN $3,274.29 AT 0% INTEREST TO THE FEDERAL GOVERNMENT?
Taxpayers who receive a refund effectively give the IRS more money than owed for the year but receive only that same amount of money back after filing. You could have saved, invested, paid down debt, etc., with that money!
Adjusting your withholdings to avoid a refund will pay off financially, helping you achieve Financial Freedom.
What to do with that extra $250 each month (Average American receives $3,000.00 refund. $3,000.00/12 months = $250 EACH MONTH)? Save the $250.00 and invest it! If you could live without this money in 2020, you can live without it in 2021 and the future. SAVE TO ACHIEVE YOUR FINANCIAL FREEDOM!
MAKE 2020 THE LAST YEAR YOU GIVE THE GOVERNMENT AN INTEREST-FREE LOAN!
YOU MIGHT ALSO ENJOY:
SO YOU GOT A HUGE TAX REFUND – NOW WHAT?
FREEZE – HANDS UP AND DROP THAT CREDIT CARD!
FINANCIAL LITERACY IS JUST NOT THAT COMPLICATED – TRUST ME!
LEARNING TO MANAGE YOUR BUDGET LEADS TO WEALTH!
THE NEED FOR EMERGENCY SAVINGS – MORE IMPORTANT TODAY THAN EVER!
KEEP IT SIMPLE STUPID {KISS} – THE S&P 500 ETF INDEX
APPENDIX
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ABOUT ME
I am a proud nerd (as my beautiful wife and daughter have told me) investment and finance blogger with an N.C. State, Chemical Engineering, University Rutgers, MBA and Harvard University, Advanced Management education.
I left a corporate career because I desired to make a difference as a speaker and writer. I was blessed to be coached and mentored by strong women and men in my family and professional life. It is my time to serve and give back.
DISCLAIMER
I started my first business at ~13 years of age (a small but brilliantly created plant nursery). I am a successful investor in stocks, options, real estate, and happy to share my finance and investment lessons learned with you.
However, I am NOT a licensed financial advisor. Please do not construe my suggestions on this blog as recommendations for your situation. Please seek your licensed CPA or fiduciary financial advisors for individual financial advice.
I write this weekly blog to make an impact by reaching an audience and demonstrating the need for financial literacy. I will help you get there.
