Deciding if you need to change your withholding is a relatively easy decision. Look at your tax returns for the past two or three years. Do you consistently receive the same amount as a refund? Next, look to the future. Will your lifestyle this year be the same as it was last year? (Consider job status as well as family size.) If you answered yes to both questions, then changing your withholding is definitely a good idea for you.

Changing your withholding is as simple as completing a form with your employer’s human resource department. All you have to do is request a W-4 form and fill it out with your new withholding information. Once you turn it in, you should see your take home pay rise and your federal withholdings decrease.

Before you think this all sounds too easy, though, there is a catch. You have to figure out what to put on your new W-4. Unfortunately, the form doesn’t allow you to simply put in the dollar figure that you want to have withheld from your weekly paycheck. Instead, you have to select a filing status (married or single, for instance) and specify a number of exemptions.

There is a worksheet included in the W-4 form to help you determine what your exemptions should be. It takes into account lots of details about your tax returns, such as itemizing deductions, paying for childcare, or even working more than one job. Since you have to have so many details to complete this worksheet, you’ll want to have your latest tax return handy as you low through the worksheet.

If this all sounds like Greek to you, there is one other option. When you have your income taxes prepared simply take your current pay stub and a W-4 form with you. Ask your tax preparer to help you fill your new form out. You may have to pay a minimal fee for his help, but knowing that you’re paying the right amount of income tax will be well worth the extra cosst.

Content provided by Not Made Of Money: Your Tax Refund – How to Adjust Your Withholding for Next Year?

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Finding your tax bracket is relatively simple. You just need to look at the tax tables (they’re available at the IRS website) and find your taxable income. Be sure to look at the tax table for your filing situation whether you’re filing as a single person, a head of household, or another status. Once you’ve found your income and its corresponding tax rate, you’ll know you’re looking at your tax bracket.

One important thing to point out is that the use of these tax tables requires that you have an idea what your taxable income is. Bear in mind that your taxable income is not necessarily your gross income. Taxable income is your (or your family’s) income after certain adjustments have been made, including deducting the standard or itemized deduction amount or your 401(k) contributions.

The division of these brackets changes from year to year, so it’s important to make sure that you’re looking at the appropriate year’s tax table. This year, a single person has to earn more than $8,350 before he moves out of the 10% tax bracket. However, in 2008 a single person only had to exceed $8, 025 to move into the next bracket.

The IRS also updates many of its allowances each year. For instance, the personal exemption changed from $3,500 to $3,650. The standard deduction for a married couple has increased $500 to reach $11,400.

Even the amounts of tax-deferred account contributions taxpayers are allowed to make are subject to adjustment for the new tax year. Contributions to 401(k) plans are now allowed to be as high as $16,500. Individuals can now contribute as much as $3,000 to their health savings accounts. With so many important amounts changing, you should take a few minutes to make sure that you’ve adjusted all of your contributions before we’re too far into the new year.

Content provided by Not Made Of Money: Tax Brackets 2009

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While I can’t tell you exactly what to do, I can tell you what factors we look at as we make this decision each year. Hopefully, having the factors disclosed in black and white will allow you to examine your own situation and make a decision that works for you and your family.

Do you feel comfortable with each of the aspects of your return? If there is some portion of my tax return that I feel uncertain about, then I definitely consult a professional. For instance, if you recently became self-employed, you might be a bit shaky at filling out the Schedule C that is required. You get into a ton of questions about deductions for a home office, mileage expenses, and supplies. If you need help discovering what your true business expenses are, then it might be a good idea to consult a professional. Next year you might feel confident about filling out the form on your own.

Have there been any big changes in your life? Did you get married this year or have a baby? Maybe you bought your first home and think you may be eligible for the first-time homebuyers credit. New situations can call for a lot of changes in your taxes. You don’t want to miss any breaks you might qualify for. A professional can help you make sure that you don’t pay any more taxes than you have to pay.

Will you e-file? If you want to file electronically, you have a couple of options. You can use an internet service like TurboTax to file your return or you can use a professional and have them file it. You may decide that if you’re going to go to all of the expense of paying for TurboTax that you might go ahead and hire a professional. Alternatively, if you aren’t in a hurry to get your refund and like paperwork, you can file on paper forms for free.

You may be wondering, after all of this discussion, what we do in our household. Truthfully, we use TurboTax – it costs around $50 and we file our federal returns electronically. In addition, I never have to worry that a silly math error has fouled up our return (one of my biggest worries). Finally, TurboTax remembers our information next year. Then, if there are any big variances between the returns, I can make sure that it is an intentional variation.

Content provided by Not Made Of Money: Tax Prep Time: Should You Do It Yourself or Hire a Professional?

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One viable option for your rebate might be simply to save it. Maybe your emergency fund is already scarily low and needs to be replenished. Perhaps you’ve heard rumblings of potential lay-offs at work and fear that you may need those funds in the near future. Although consumers are encouraged to spend their rebate check as quickly as they receive it, you should feel comfortable with the idea of saving your rebate if you financial situation warrants it.

Households that are already mired in consumer debt may find that paying down their debt is the best use of economic stimulus check. If you already have outstanding balances on store accounts or Visa/MasterCard, applying your rebate to those account balances may give you some breathing room in your financial plan. Perhaps if you’re able to use your rebate to catch up on payments to those debtors, you’ll be able to start planning for your financial future again.

Finally, a large, but planned, purchase is always a good use for your rebate. Some consumers may find that their rebate allows them to complete their savings plan for an upcoming purchase. Have you been scrimping and saving for a new refrigerator? Your rebate may allow you to finally make that purchase. Or perhaps your car needs new tires. If you’ve been putting off buying those tires until you could pay for them with cash, the economic stimulus package may speed that day’s arrival.

When deciding what you and your family should do with your rebate, the most important thing is to figure out how this money works into your existing financial plan. If making a large purchase or taking a vacation was already in your plans, by all means, you should use your rebate to step closer to that goal. However, if your current financial goal involves savings, you should use your rebate to further your advancement towards that goal. Just consider your economic stimulus package as a jump-start to your financial plan, and you’ll find the perfect way to use your rebate.

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Getting a copy of the Turbo Tax software couldn’t be easier. Major retailers like Office Depot or Walmart all carry the software. However, if you’d rather not deal with installing software on your computer, you can use Turbo Tax’s web-based application. Simply create an account on the Turbo Tax website and you’re ready to get started on your return.

Another great thing about Turbo Tax is the many different versions available. If you are single with a relatively simple tax return, there’s even a free version of Turbo Tax for you. Don’t worry if you’re not sure which version is right for you. You can start inputting your information with the simple version of the software. If, during your tax return preparation, your information indicates that a more complex version of the software is required, you will be notified. You can even transfer your information to the more complex version if you decide to upgrade.

Finally, the best part about Turbo Tax is that it gets its customers away from staring at tax forms and instruction booklets. Turbo Tax utilizes a friendly question and answer format that makes preparing your taxes more like conversing with a person. And, if you’re not sure what a question is getting at, there are plenty of help options to help you decide what the right answer is.

Turbo Tax seems to give taxpayers the best of both worlds when it comes to tax return preparation. At a significantly lower cost than having a professional complete your return, you can file your federal and state income taxes, file electronically, and have your tax refund (if applicable) deposited directly into your checking or savings account. The software is easy to use and understand and there’s no waiting in the tax office to visit a tax preparer. If you think you’re ready to complete your own income tax return, Turbo Tax is the way to go.

Content provided by Not Made Of Money: Make Doing Your Taxes Easier with Turbo Tax

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