Wednesday, March 18, 2009

Gimme My Money

Jean Chatzky, host of “Oprah and Friends” radio, wrote up a blog on the tax advice I recently offered on her show. You can find the full post and other great posts on her financial blog, here.

This morning, tax expert Roni Deutch was a guest on my radio show. First, I need to know what that woman eats for breakfast. She is a bundle of energy on a subject that puts way too many people to sleep. But she made a really important point about tax refunds. If you’re among the Americans who receives one each and every year — and tax refunds have been running, on average, about $2400 for the past few years — or even if you simply got one last year, I want you to think about changing your withholding. Here’s why: When you get a tax refund, that means you’ve been giving the government an interest-free loan.

As if that weren’t bad enough, this year some states have intimated they aren’t going to be giving you your money back — at least not right away. Kansas. Arizona. California. All have delayed the processing of tax refunds, again YOUR money, as a solution to their cash flow problems. And in other states, including New York, where governments have said this is not happening, we have started to see some anecdotal reports that refunds are slowing down.

So what do you do? Sit down with the payroll department at your company and adjust your withholding. If you get a tax refund you want to increase the number of dependents you are taking. The key is not to owe Uncle Sam at the end of the year, but to break even. Particularly when Uncle Sam is so poor, he wants to hang onto your green.

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