Nobody likes writing a check to Uncle Sam in April. This is the result of under-withholding. A healthy refund check is more fun to anticipate! However, receiving a refund check is not necessarily good for you. Whenever you receive a tax refund it means you paid more taxes out of every paycheck during the year than was required. A refund check also has to be reported as income on your next years’ tax filing, increasing that year’s tax obligation. Keeping this money in your pocket every payday can be better than depositing it in a non-interest bearing account in the Bank of Uncle Sam. A $3,000.00 annual tax refund could translate into $250 more in your budget every month! The average tax return amount in 2009 was $2,675.00.

In order to keep this income in your pocket every month and avoid under-withholding at the same time requires that you periodically evaluate your IRS tax exemptions.

The IRS recommends that workers adjust the amount withheld whenever one of these personal or financial changes occurs:

• Lifestyle change: Marriage, divorce, birth or adoption of a child, loss of an exemption and retirement
• Wage income: if you or your spouse stops working or takes on an extra job
• Increase or decrease in income not subject to withholding: interest income, dividends, capital gains, self-employment income, and IRA distributions
• Increase or decrease in adjustments to income: IRA deduction, student loan interest deduction, and alimony expense
• Increase or decrease itemized deductions or tax credits: medical expenses, taxes, interest expenses, gifts to charity, job expenses, education credit, and child tax credit

Whenever one of these events occurs update your W-4 form. You can check if you are withholding the correct amount by using the IRS Withholding Calculator found at http://www.irs.gov/individuals/article/0,,id=96196,00.html. The calculator will help you determine the most appropriate amount to withhold from each paycheck. Before using the calculator, locate your most recent pay stubs and past income tax returns. After using the calculator and determining the proper amount to withhold, visit your Human Resources Director and adjust your W-4 form.

This year it is especially important to check your withholdings because of the Making Work Pay tax credit, a provision of the American Recovery and Reinvestment Act. The tax credit provides single adults with a $400 tax credit and married couples an $800 tax credit. Most people will receive this tax credit over the course of the year through decreases in the amount of tax their employers withhold from each paycheck. Employers will use the W-4 to determine the amount of credit to apply.

The Making Work Pay tax credit may cause some people, such as those with two employed spouses or individuals with two jobs, to owe money at tax time. Households with two sources of income may receive double tax credits. For example, a single mother who works two part jobs may receive the tax credit from both her employers. When she files her taxes, she will have to pay the extra $400 she received from her second job back to the government. The IRS suggests the following individuals visit the IRS Withholding Calculator to make sure they are withholding the proper amount:

• Those with pensions
• Married couples with two incomes
• Individuals with multiple jobs
• Dependents
• Social Security recipients who also work

The corrected withholding will begin when your updated W-4 is filed. Update your W-4 as soon as possible, so you can benefit from the corrected withholding for the remainder of 2009.

Once you determine the correct amount to withhold from your paycheck, make a plan to take advantage of the larger paychecks. If you normally receive a refund check from the Internal Revenue Service, you will begin to notice extra money in your paycheck every month once you adjust your withholdings. Do not let the increase in net pay slide away! Keep your long term goals in mind and use these funds to increase savings or decrease debt. Earn some interest by placing this extra income in a savings account. You could also put the extra money towards your Credit Advisors Debt Management Plan by contacting your Account Manager.

Quite often people forget about their W-4 form and how their withholdings are calculated. By updating your exemptions, you will have a little extra money in your pocket every month.