The Secret to Scoring a Tax Refund Every Year
My Tax Return Nightmare
I’m not a fan of preparing my tax return. The thought of staring at forms and numbers all day is enough to give me a headache. It’s a chore I dread every year, but one that’s necessary if I want to get my hands on a nice chunk of change from the government.
The Good Part: Getting a Refund
Despite my dislike for tax season, I’ve been lucky enough to receive a tax refund every single year. It’s a wonderful feeling, knowing that I’ll get a surprise deposit from Uncle Sam in the spring. It’s like finding money in my pocket that I didn’t know was there!
The Magic Formula: Claiming Zero Exemptions
So, how do I manage to get a refund every year? It’s simple: I don’t claim any exemptions on my W-4 form. This might seem counterintuitive, but bear with me.
What’s a W-4 Form?
A W-4 form is a federal document you fill out when you start a new job, stating how many exemptions you’ll claim on your tax return. These exemptions are like “free money” from the IRS, and they can add up quickly. For example, if you’re married with no kids, you’ll get an exemption of $8,100. Add a child to the mix, and that number jumps to $12,150.
How Exemptions Affect Your Paycheck
When you claim exemptions on your W-4, you’re giving the government an estimate of how much tax you’ll owe at the end of the year. Your payroll department uses this information to determine how much income tax to take out of your paycheck. The more exemptions you claim, the less tax is taken out.
Tricking the System
I choose to claim zero exemptions on my W-4, which means I’m essentially telling the government I won’t be claiming any of that “free money.” This results in more taxes being taken out of my paycheck throughout the year. But here’s the thing: I’d rather have that money taken out upfront and get a refund later than risk owing more taxes at the end of the year.
The Psychology of Money
Some people might think it’s silly to give the government more money upfront, only to get it back later. But for me, it’s all about psychology. If I had more money in my paycheck each month, I’d probably spend it on things I don’t need. By having the government hold onto that extra cash, I’m forced to save it. And when I get my refund, I usually put it straight into my savings or retirement account.
Try It Out for Yourself
If you’re not living paycheck to paycheck, I encourage you to try claiming fewer exemptions on your W-4. It might just result in a nice refund and help you reach your financial goals faster. And who knows, you might even be able to retire earlier or take that dream vacation sooner.
About the Author
Brittney is a CPA in Indianapolis who loves carbs and runs the blog Britt & the Benjamins, focused on helping people achieve financial independence and succeed in their careers.
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