To be able to make use of a tax refund calculator correctly, some basic information and facts are required – such as the number of dependents you directly support, what your income is, what your deductions are – this could be stuff like mortgage loan interest or charitable contributions you’ve made etc. The more accurate the information you input into the tax refund calculator, the greater accurate your results.
The precision of the calculator is incredibly good. As always – the trash in / garbage out rule applies. Meaning if you decide to put garbage numbers in, you are likely to have erroneous results.
A “tax refund” is really what you overpaid in taxes to Uncle Sam. It is really your money that you are getting back as a refund. But this will not be the case always, you could also end up owing money to the IRS, if this is the case the tool will give you an estimate of how much you owe. This is useful – because lets say you figure out in late December (using the refund calculator) that you owe money to the IRS in April when you file your taxes, you can plan for that upfront – you will have 4 months to save money to pay the IRS.
One additional use of the calculator is to adjust your exemptions. In the event you are receiving a lot of dollars as tax refunds year after year, you can change your federal witholding by submitting a W4 form to your employer. By increasing your exemptions on your W4, your employer is going to withold less out of your salary, and you’ll in fact see more net pay (take home pay) on the paycheck. This does not mean that you are increasing your take home pay or decreasing your taxes in any way. It simply implies that you’ll not get a big refund the coming year however, you will see a larger paycheck. In truth the net effect on your income tax is actually nothing
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About the Author:
Ron Robson is a freelance writer and management consultant. He writes extensively on effective management. One of the sites he writes for is : Tax-Easy.com