Are you one of those people that gets a large tax refund every year and you pay bills; or take a vacation with it? You’re providing the federal government with a free, no interest loan on YOUR money if you do. MSN posted this article, How to Adjust your Tax Withholdings, which provides a step-by-step guide to show you how to adjust your tax withholdings to put more money each paycheck in your pocket. Why should you do this you ask?
Besides the fact that you’re loaning your money to the government free of interest and you know they would never reciprocate the sentiment, you’re needlessly tying up your money in an account you cannot access but once a year when your big fat refund arrives. Besides, if you need to file bankruptcy, the trustee has the power to take that tax refund to pay creditors.
Taking charge of your money requires a disciplined approach. Creating a budget that includes your monthly bills is the first step. You also need to include those annual bills like insurance and taxes and set up a savings account, making regular monthly deposits to be sure the money is there when the bills arrive. I know savings rates are low, but it’s better than tying up your money for a year and making nothing for handing it over to the feds for a while.
When it comes to filing bankruptcy under Chapter 7, the trustee’s job is to look for assets to take from you to pay your creditors. Any tax return greater than $500.00 can and will be taken by the trustee. Adjusting your income tax withholding is an easy remedy for you to not only break even at tax time, but leave nothing for the trustee to take to pay creditors. Consult your tax advisor and your bankruptcy lawyer to create the best strategy for you.