Tips for the First Time Tax Filer
Posted on Thursday, October 8th, 2009
It is important to complete your paperwork properly when you land your first job. When you are hired you will no doubt be required to complete a raft of paperwork, including a form known as the W4. Also known as the “Employee Withholding Allowance Certificate” this seemingly simple form will have a large impact on your tax bill and your tax return.
While many workers think that getting a big tax refund is a great thing, in fact a large tax refund means that you have been lending your hard earned money to the government – interest free. If this sounds like a bad investment to you that is because it is. It is far better to forgo that big tax return and invest the extra money throughout the year. The power of compounding will help that money grow greatly over the years.
In order to strike the proper balance when it comes time to pay the tax man the exemptions you claim on your W4 should match the actual number of exemptions you have. If you are a single person this means claiming one exemption. If you are married add an exemption for your spouse. If you have already started a family claim exemptions for each child as well. Claiming your actual number of exemptions will reduce the amount of any refund due, but it will also give you more money in your paycheck.