Let’s face it, we can all use more in our weekly/bi weekly/semimonthly paychecks. It would’ve been difficult to walk into the boss’ office today and judiciously argue your merits for a raise with the economy in turmoil as Undoubtedly it’s. Except for one small fact, Some see it as forced savings, that to a degree is understandable. You know that little piece of paper that you filled out when you first started your job? Now regarding the aforementioned fact… It’s called a W4″ and its purpose is to tell the employer’s HR Department just how much money in Federal withholding they must take from your gross salary any payday.
Under this plan, contributions are exempt from Federal, Social Security, and Medicare taxes.
They can receive a hefty refund when they file their annual 1040 individual tax return, Most people choose 0 withholdings, that is a huge mistake.
It might be nice to see a big direct deposit in your credit after filing your 1040 to pay off holiday spending, or fund your IRA, or even fund your summer vacation but with more people struggling to live on current salaries, why will you look for to forfeit the ability to have that extra money in a high yielding savings account. Anyway, this vehicle is a way to pay for general healthand childcare expenses similar to daycare, medical insurance premiums, and most out of pocket medical expenses. The worksheet that you probably had no clue what to do with but knew that it had to be filled out? This way, you are still paying identical percentage of money for medical and child care expenses, however the earnings are not being taxed, thereby leaving more money in your net pay any period.
THERE IS NO INTEREST EARNED ON THOSE SAVINGS.