Laura Day’s Top Ten List – Number 9: Withholdings

There are some things we see over and over that are really not in your best interest.  Here’s why:

#9.  Changing your withholdings to generate more quick cash

We sometimes see individuals who have changed their withholding taxes by increasing deductions so that there is more take-home pay, which new-found cash is used for bills, living expenses, or to pay creditors.

The problem is, come tax time, you will still owe the state and federal taxing authorities.  Of all the creditors in the world, which you can have, given the choice of who you owe, you do not want it to be the IRS or any state revenue cabinet.  While they will usually work with us on some resolution of their claims, they are the government, and they never go away.  If you later must file bankruptcy, their claims are generally not dischargeable.

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