W2 Tax Planning

0

Dear Dave,

Do you recommend having people keep their W2 numbers as close to their tax return numbers as possible, even if they might have to pay at the end of the year or have more taken out? Every year I get a big tax return. But after listening to you I began to think that if I did a better job of planning I would have more money throughout the year. — Charlie

 

Dear Charlie,

I like your thinking, and you’re absolutely right. That’s exactly what I recommend people do when it comes to their income taxes. Of course, you don’t want to have to pay out a big chunk of cash. But a little number crunching and planning ahead of time can help you avoid those kinds of situations.

You really don’t want a big refund, and here’s why. If you get a fat tax refund every year, all it means is you’ve loaned money to the government interest-free for the entire year. Then, at the end of the year they gave it back to you. Some people seem to think Santa Claus has shown up when this happens, and that’s completely wrong. You’ve had too much taken out of your check every payday during the previous year, and then you got it back.

Try to adjust your W2 so that you are hitting within $100 or so at the end of the year. Then you’ll have more of your own money in your own pocket throughout the entire year! — Dave

Share.

About Author

Dave Ramsey

America's trusted voice on money and business, Dave Ramsey is a personal money-management expert and extremely popular national radio personality. His four New York Times best-selling books—Financial Peace, More Than Enough, The Total Money Makeover, and EntreLeadership—have sold more than 7 million copies combined. His latest book, EntreLeadership: 20 Years of Practical Business Wisdom from the Trenches, debuted at number one on the New York Times best-selling list.

Comments are closed.