So did ya get a big tax refund?  Yeah?  Wooohooo!

No, wait.  Hmmmm… Maybe not so good.  Wait a minute, do you mean that I let Uncle Sam have all that money all year?  When it could have been (at least) slumming in my savings account?   Hey, maybe I should fix that.

If you had a large tax refund, then your employer is likely over-withholding from your paycheck.  Your employer’s calculation assumes that you’ll use the standard deduction, so if you itemize, you’ll probably want to reduce your withholding.  The larger your itemized deductions (as a percentage of your income), the less you’ll want withheld.

Now I agree with Nina, over at Queercents, that it is nice to get a refund at tax time — much better than having to write Uncle a check — but you don’t need to drive your refund to zero, just bring it down a notch or two.  It’ll help your cash flow throughout the year.  Bonus points will be awarded if you set up an automatic investing plan to invest the tax savings every paycheck to take advantage of dollar-cost-averaging. Continue Reading »