Spring Cleaning Part 2

Video Transcript

How long has it been since you took a close look at your finances? If it's been a few months, it might be time to try a little spring cleaning, but for your money. Hey this is Chris with Money Burst and this is part two of our financial spring-cleaning series. Today, let's take a look at your taxes.

Now hopefully you've learned some very helpful information when you filed your taxes this year because some of you might have owed, some of you might have gotten a refund, and if you ended up owing money that means you've been underpaying your taxes all year long. On the other side, if you got a refund that means you've just been sending the IRS too much money each paycheck. I want you to use this information that you've learned to adjust a form called a W4.

At payroll, they use the W4 form to set up how much tax they'll take from each one of your paychecks, and you can go in and ask them to update this form anytime you want. And trust me, if you're nervous about asking them, trust me, it's going to be okay. I used to run payroll departments in a past life, and I did it for years and people come in and ask to update these forms all the time. I never cared because it took me like a minute to go in there and update it, so don't feel nervous. Go in there, feel free to change it anytime you need to.

All right, I want to give you an example to work off of here. Let's say you ended up owing $1,200 on your taxes, I just picked $1,200 because it's easy to divide that by the 12 months in the year. What I want you to do is update your W4 to take out an additional $100 per month. And as long as nothing significant has changed next year compared to this year, like for example, you didn't get a new house, you don't have a new kid, a new job, or a significant raise. If everything is pretty similar, this will put you in a much better place for next tax season and hopefully reduce the amount that you owe.

I also recommend visiting the IRS's website. It's irs.gov, and you can use their free tool. It's called the Tax Withholding Estimator, and it will help you go through and calculate the right amount you should be having withheld from your check because sometimes that W4 form can be really confusing. So, I always love going directly to the source. The IRS will let you know what you should be doing, and get you much closer to eliminating any huge tax bills that you may have.