Thursday, January 03, 2013

Taking Home Your Take Home Pay Is Not Illegal

A common complaint, heard weekly or bi-weekly depending upon how frequently you receive your paycheck, and which is uttered by both Republicans and Democrats, is “Dang it, look how much taxes they took out of my paycheck.”  It’s a legitimate complaint.

Americans also are frequently informed, via the news media, that many in America are living paycheck to paycheck, struggling to make ends meet.

One clear answer to why this is is the tax burden imposed on Americans by federal, state, and local governments.  But there is also another reason, amongest others, as to why this is, and this reason is in large part a self-inflicted monthly tax burden.

In 2011, the average tax refund Americans received was $2,913.00.  This amounts to the average American taxpayer denying themselves the use of $242.75 per month.  This is no little amount of money, and it would go far in assisting Americans whom we are told are living paycheck to paycheck.  But why are Americans denying themselves $242.75 of their hard earned pay every month?

Part of the reason why Americans are denying themselves this $242.75 every month is because they have been conditioned to consider a tax refund as new found money, a cash bonanza you could call it, like hitting the lottery, and there is much rejoicing when these refunds hit Americans’ mailboxes, and the common paycheck complaint uttered throughout the remainder of the year is very temporarily forgotten.

The more important, and actual, reason Americans are denying themselves this $242.75 per month is the fault of the IRS W4 Form (pdf of 2 pgs.), which each hard working American fills out for their employer who collects the taxes to forward to the government.  The W4 Form is filled out by working Americans so that the employer can calculate tax withholding.

Because Americans’ paychecks are about to become smaller, once again, thanks to new tax deal the government has cut for itself,

-A consequence of the tax agreement is to increase payroll taxes on 155m American workers by $125B. We know this hurts middle and low income workers and their families. We understand that this is a very big tax increase, and that it will knock at least 1% of 2013 GDP (and beyond). We’re sorry about this, it couldn’t be helped. Nancy Pelosi and Harry Reid insisted it be this way.

Americans should probably look into amending their withholding taxes via the IRS W4 Form, but they should not rely on the IRS’s tax withholding calculations as determined by the W4 Form, because it is designed to benefit the government, rather than Americans’ weekly take home pay.  If you are filling out the IRS W4 Form, with its “Enter “1” for yourself” etc. suggestions, you will be denying yourself a portion of your take home pay you so badly need to make ends meet, and I think this may be by design, because the government is badly in need of money, your money.

Americans can legally claim up to 10 exemptions, if I am not mistaken, on the IRS W4 Form, though the way the form is designed, Americans have no way of knowing this, and the IRS’s calculation suggestions will definitely not inform Americans of this.

If you question this, and I am not a tax preparer or attorney, go and talk with your tax preparer, or your human resources personnel, but the proof of this assertion is in the average tax refund Americans receive each year.  Why live without that $242.75 per month?

Quote obtained via a Business Insider article titled The White House Left Out One Inconvenient Item On Its Fiscal Cliff Deal Fact Sheet, linked via Donald Sensing.

Posted by John Venlet on 01/03 at 12:08 PM
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