How The New Trump Tax Plan Affects Your Finances
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When is the best time I can call to get advice? Asking as a recent college grad trying to plan out my finances for the future~
guessing M-F 2-5pm est
Can you please tell me the best decision on 1099 or W2 at making 35k a year...
I've always wondered why people over witheld...at one of my jobs, my bosses were trying to convince me to withhold more and when I asked them why, they said "You'll get a bigger tax return!!!" And I replied "Or I can just keep my money and not loan it to them for 0% interest" and they were acting like I was crazy. No one ever taught me this concept, it's just common sense
Joe Garofalo II
I over withhold every year for $4k-$6k each year.
My choice. And I get it back.
It goes mostly to emergency fund and tax free retirement savings.
I never had consumer debt and wonder why so many have debt and give to banks,credit cards,etc. in interest,penalties,etc. every year never getting it back.
BlackWorldTraveler I do the same and will continue to do the same thing. It does help.
So if I’m a single guy no kids making 60k a year should I still claim 1 or 0 for allowances ?
darius parker I claim 0 then I put down that I want an additional amount withheld still. It’s more important for me to do this because I have two jobs. On top of that one of the jobs has a benefit in which I have to pay the taxes on what they provide to me for free which goes in as added income. I have no way of calculating that properly, it would be all over the place.
@ Joe Garafolo II - yup, someone telling you to withhold more for a bigger tax refund sounds pretty stupid. Let them look at you like you’re crazy. Sounds like you know who’s really the crazy one.
Just to let you know you changed my family’s life! I purchased your book a few years ago and it completely changed the way we budgeted our money. We no longer live “tight” paycheck to paycheck and we are able to be more “giving” financially. I just want to say thank you. I know you hear it a lot, but 1 more time won’t hurt. 😁
I've been trying to adjust to zero for years. Sometimes I'd pay $100 to $300, sometimes I'd get back the same. This year I get back $19. Getting better at it after listening to Dave for 25 years.
Be careful, some overdo it and end up owing in the end. Dangerous game to play if your only plan is to spend, spend, spend.
Also, they have new w4s for 2020 which changes the whole game you just figured out.
@@georgev3320 Fortunately someone listening to Dave who's been trying to adjust their withholding over several years is probably prepared to pay any back taxes. Especially since he never owed more than $300 and has adjusted it to get closer to 0.
My husband legitimately made the IRS send him a check for 1$. He was so proud of himself lol! It hangs on the fridge.
@@georgev3320 Owing isn't really an issue as long as you don't owe so much that you have to pay a penalty. If you owe after filing your taxes, it means that you've been getting an interest free loan from the government. IIRC, as long as you owe less than $1k on the taxes, you don't pay a penalty.
Why they don’t teach these things in school is beyond me
schools are government funded if they can get more money out of taxes why would they teach someone to do something that would lower their slush fund
because it's part of the plan... Govt. wants stupid people. Stupid people are dependent on the Govt. Stupid people do as they are told or else they don't eat. Stupid people vote a certain way, but we won't go there.
Public Schools are government controlled babysitter programs so you can go to work and pay taxes.
@@douglasthompson9070 public schools are used to brainwash the young to think a certain way.
You are so right, they should also teach how to trade on the stock market in schools
I use to pay people like $200 to do my taxes!! Thank God I learned how to do it my self, because my taxes were simple. I didn’t have all that extra stuff.
I used to pay $200 in order to get back an extra fifty. I must have been preparing for government work.
Same. I had a few extra things, but it is not that hard to deal with those, especially with the software out there now.
Do you use a program?
Went with a friend to HR block to do taxes, noticed they were using the same program you can buy for 25 bucks!
@@Chief_5 which program was that?
The smartest video for high school kids and anyone who doesn’t know about taxes.
Full Tilt Boogie I know about taxes enough to know what is theft and what is not
@Full Tilt Boogie Not in America nutburger...
"It's my money and I want it now!" - JG Wentworth
LOL, the irony there is that the service he offers is a terrible deal for those taking him up on it.
🤣👍😂😂
Cam 😂
Call JG Wentworth, 877-CASHNOW!
877 cash nowwwww
Something Ramsey didn’t mention which is why many people are afraid on setting the allowances too high: if you overestimate too much, the IRS will charge you a penalty. Don’t ask me how I know that.
You are correct he didnt mention this important fact.
I do pay in extra because I have a small business and I love getting it back because that’s my Buisness lol
He wants you to withhold the right amount, not to withhold too little.
Some folks do it because they cant save the money themselves
than they are a special kinda stupid
Please don't judge and criticize people
Because their margins are so tight already. High withholding forces them to make due with less and the larger refund makes possible bigger purchases they might not otherwise be able to make. When you have to choose between food and fixing the car, things can (and do) get unmanageable fast. It's easy to assume everyone else has the same options you do. But the truth is most of us don't. We need to quit judging the choices of others based on an assumed set of circumstances that don't exist. Job security is non-existent, real wages are falling, employment opportunities blow (even with higher ed) and the cost of credit challenges are crippling. If we don't change some stuff pretty soon, big tax refunds will be the least of our problems. Where would you put $5000 that would earn you ANYTHING and still be accessible, predictable, and secure? The assumption that you can earn interest on money saved is an old and invalid argument applicable only to people of means. When it's the only money you have, the argument vanishes. Mr. Ramsey has either never struggled or long forgotten the realities.
@coda creator "Where would you put $5000 that would earn you ANYTHING and still be accessible, predictable, and secure?"
In T-bills. That you don't know where to get a good return on your money, doesn't mean options don't exist.
@@codacreator6162 what part of you would have MORE money every pay if you only set yourself up for less of a refund, that happens once a year, don't you understand?
Unless you get credits like the EIC or CTC Or ACTC, these are refundable credits which means that it can produce a refund even if there is no tax liability on the return. So just because you get a refund doesn't mean you doing it wrong. You can adjust your withholding correctly like Dave Ramsey says, and if you qualify for refundable credits then you still will get a nice refund at the end of the year.
Alex jasso bingo!! 🙌
I pay zero federal taxes all year and still get a refund of atleast $4k every year due to these credits.
@B K Idk, I just file my taxes. It may be due to me having 4 kids under the age of 13, and a wife who doesn't work. I'm not making that much a year and I still have health insurance and 401K taken out to reduce my taxable income. As the original post states, certain credits are refundable, so we get back the credits that we're eligible for as a refund, due to us not having to use them to reduce our tax liability. Also the tax worksheet have us at 22 dependents which equate to no federal taxes coming out throughout the year.
B K it depends
Everyone’s tax situation is different
So true. I get a refund every year and no federal taxes coming out in my paychecks.
I’m a total lefty but this is the reason I watch Dave Ramsey. Very good tax advice in a simple way for dummies like me to understand. Very few people on the internet can explain basic financial decisions as good as Dave can. Boom baby!!
Thanks for this! My father retired from the IRS -he said the same thing- make your return come out equal where you don't owe or you won't get anything back. My x wife was complaining about this one year- we are not getting any money back on taxes like everyone else!. I told her we are not supposed to. I did the taxes. She insisted I did them wrong. I said ok - I took the taxes to H&R Block (against my better judgement) and I matched them line for line. After paying their fee- I went home and showed her - I said don't ask me about the taxes again!
I wish it was that easy. I claim 0 and still owe every year. Since I get paid on commission they never withhold enough.
@@2themaster There are such things as quarterly estimated payments. I had to do them four times a year when I was self employed.
It's your money, use it when you need it.
It's MY MONEY, and I need it NOW!
jG Wentworth!!
877 Cash Now
Kurt Mercer 😂
🤣
I love when I open a Dave Ramsey video and a credit card commercial start before the video lol!
I use Adblock and never see any ads.
Lol I got a car lease promo
He is a hypocrit like most conservatives
It's loaning the government money for free.
For some people this is the only way they will save money.
@@acruzro95 Except that means you were giving the government that $38 per week anyway, so everything you said would apply there anyway.
The better way would be to set up automatic monthly savings so you don't see it.
Exactly!!! That’s the same thing I always said !!!
For the ones that actually save their refund, kudos to them...but realistically, majority people fly through that money by April. Saving takes discipline, so whether if they get most of their money throughout the year or through an annually refund, it really wouldn’t make a difference if they’re not good with money.
Everyone I know who gets big refunds spends it on TVs and such nonsense. I only knew 1 woman who told her daughter to take her refund and stock up on household supplies, food, etc.
Yes, but in that case, the correct solution is to learn how to properly manage your money.
Letting them keep your Money at 0% isnt much worse than almost 0% in your bank acct.
2558jmb that’s what I was thinking lol, my savings account is at one of the highest rates I can find and that’s 1.6%. So by getting a return of 2k-5k I’m sacrificing up to $8 annually in interest.
Except for the fact that you have access to it while it is in your account.
Invest it. Or put it towards your emergency fund, or pay off debt. You're paying interest on your debt. So yes, depending on your circumstances, it can make a huge difference...
@@TheWebAdict On point!
What if they decide they don't want to give it back?
Funny line: "I know Santa Claus, he's a good friend of mine, and he does not live in Washington, D.C."
Just like I thought, he lives in NYC
His name is Bernie.
Susan Sauls Bernie is like the grinch
The best part about this video is that Dave is willing to do what is right and call out when someone is doing something right! We should all look into why he makes this decision.
The more you have, the more your taxable amount and could put you in a higher tax bracket. This is one reason why many people prefer to have some additional money taken out of their check each pay period. In other words, you pay now or pay later. Also, many people do consider it a way to have more taken out and receive it later as a way to save some money automatically without having to actually think about doing it each pay period, with or without interest.
I had to tell my mom that yesterday. She tired to say that some treat it like a savings plan. I said back it would be better putting that money in an actually savings account earning interest.
Yea but the savings account at the bank is accessible to you any time. So when unexpected bills, etc come up most people would use that money in the savings account to take care of it. Then when the end if the year comes there is no money in there because it was tapped into throughout the year.
I think that's why some people prefer to have the extra withheld because its like a savings account for them that they can not access throughout the year for any reason
@@HomeGrownPyro1 that is idiotic
HomeGrownPyro I mean that is what a savings account is for. You are supposed to have 3-6 months of expenses saved for emergency aside from saving for a house, a car or etc. You are not earning anything having the IRS hold it for you. You could put it in a Roth IRA or something. It is stupid to treat the IRS as your personally savings account.
@@HomeGrownPyro1 it's called self control... It is an important skill that those people should learn sometime...
Typically, the folks doing this aren't using good sense in their money management.
I tried to tell people this a couple years back but people didn't comprehend.
I watched this live. I had to rewind the video a couple times to make sure I heard Dave correctly when he said the IRS did something right. Something I thought I would never hear.
I did that ( divided my return & changed my w4) & I still owed money. I never want to owe the IRS money ever again. So now I take the "refund".
The mathematical side of minimizing any tax refund is pretty straightforward but I think you have to consider the human side of this as well. For those just starting to try to get a handle on their finances a larger refund might actually work out better for them. For this group the real mathematical equation should be lost interest compared to how many of those extra dollars they wasted. I would guess for many that by the end of the year that comparison would show lost interest being a small price to pay. So, maybe get your finances and budget in order first and then change your withholding.
If they are in credit card debt then having the extra money each month to pay off the cards is better. I can see by your comment that you understand that math and even if it is just $1000 refund, at 21% lost opportunity that's about $105 of interest that could have been avoided (I halved it because you are paying it down over the year). So to your point, being human, perhaps some people would be better off taking the $1000 refund 'windfall' and putting it towards paying down a card. They would get the physiological benefit and may not have had the discipline to us the additional money in their paychecks to have paid down the debt. In general, not directed at you specifically, I think a lot of what folks don't get about Dave's system is it is simple to follow and works physiologically. Math wise it isn't 'the best' but it can work for most people.
A large tax refund is one of those things that doesn’t make sense to get mathematically but it might behaviorally. If you’re someone who will just spend the extra $400/mo bc it’s not material, a tax refund could be a forced savings account. If you then put the $4,800 to good use by investing, I think the benefits of a large refund could outweigh the the cost of lost interest (for some people).
Logically incorrect that kind of person will remain the same better to spend the money as it's coming and not let the government give it to illegal aliens oh and how's Trump's impeachment going? Lol
@@austintomkewitz7206 *Government give it to large corporations as corporate welfare.
If they can’t control their spending on a monthly basis why would they be able to control it on a yearly basis?
Those are the ones that just spend it all immediately when they get it. BUT it could work out only if they have an emergency right when taxes come back. Like their dog fence needs repairing or whatever..and happens to be taxes come back. Other than that..it's not gonna work if you can't manage your money. I'm bad at money but let me just put it out there I don't do credit cards or loans. And I say dog fence because I needed a whole new fence for my dogs and I happened to run into some money during that time and it was a lifesaver.
This is super satisfying and explains so much.
For the past couple years, I’ve been calculating our total expected tax liability and then claiming as many exemptions as needed to reduce my monthly withholding to match it.
I was very confused on the 2020 W-4 when it literally only asked me which type of deduction I expect to take (if it even asked that much-its been a few weeks now) and which tax credits I expect to qualify for, then they simply decided from there how much to take from each of my checks.
At first I was extremely irritated that I couldn’t ultimately choose how much to withhold each month, but this apparently new rule does all my calculations for me..?!
Two thumbs up for the IRS!
Finally , thank you Dave Ramsey for saying exactly what no one will believe me. I barely get back 2- 300 at the end of the year . People who say that’s the only way they save is a fools statement.
You would be surprised how many people I hear say that on a daily basis.
I have enough stress in my life that knowing I won't owe anything more is one less headache for me. 🤷🏼♂️
Don’t focus on the politicians. Focus on YOUR personal finances. They’re not going to change your life, only you can.
RAM Real Estate Investing Totally agree with you. Politicians are so corrupt and for the power they hold, we don’t mean a thing to them. We’re just good to pay Uncle Sam what they want. So definitely focus on YOU!
RAM Real Estate Investing don’t focus on politicians? Only a privileged person would say such a thing.
Totally agree.
Yep good common sense, we have to manage our lives and finances, no one else is going to do it for us
That's backwards. Locally we have people who are working full time and are homeless. If we don't focus on the politicians, then that will continue. It's completely unacceptable that there are people working full-time jobs that are homeless because they can't afford rent.
Obviously, we should focus on improving our own finances, but if you look at the statistics, there just aren't enough well paying jobs out there for everybody to have one. Mismanaging finances just makes it that much worse.
Thank you Dave for explaining that.
Many years ago, I worked as a cell tower technician. I was the oldest guy on the cell tower crew. The guys were all talking about in hopes of getting a large refund. I laughed and asked if they know why they are getting a large refund? No one on the crew new why Told them their refund is large because they over paid their federal taxes. I told them I knew what tax return they use. They looked at me all dumbfounded.
I told them I get a small refund. What it means I got to keep more of my money instead of handing it over to government.
Thank you! I did the quiz and got connected with a local ELP. My taxes are extra complicated from 2019!
Dave Ramsey, is my financial Father. Thank you Jesus for great people like Dave. Where were smartphones when I was in elementary school? I am going to turn my teenage neices and nephews onto Dave Ramsey. So hopefully they can learn what these school systems don't teach.
I once owed over $1000, never again! I will happily take a refund every single year. If that’s my only money mistake, I’ll take it.
sassybearbee owing money sucks. But you don’t want to get more than a thousand dollars or so
@Ryan M True and if you owe more than 10% of your tax liability you have to pay a fee on top.
With the penalty of under estimating your taxes in conjunction with the interest the government will charge on that owed sum this equals a fools errand. It will be 10 times the amount assesd you would have gained in interest in any single year, fact. Most banks and credit unions pay 1% to 2% for cash in your savings, so what. Most individuals are living check to check and your suggestions puts them at risk to be in the rears for years if mistakes are made. I enjoy my return then invest it as I don't usually save that sum throughout the year for a far larger return on investment. You don't mention that the top 1% and corporations get a far greater return dollar for dollar so why isn't it bad for them? They get their huge return and keep smiling.
@Ryan M Impression I got from this video was that a small refund is ok, but to make adjustments if your refund is in 4 figures.
tigaagul7 if your just a regular person the ultimate goal is to have your tax refund payment as close to 0 as possible. With regard to owing over a grand you will not get penalized first year but will have to pay estimated taxes the next year quarterly based on 1 of 2 factors to not get penalized. I was close to that point and had to change my dependents down to zero to avoid this.
I am so glad my school teaches financial literacy! I'm a junior in high school and know these terms and am so glad.
I prefer the refund especially because as a single mom I find it so difficult to save money. Even though I’m missing out on the tiny interest or little investment opportunity, I like having a decent chunk once a year. Thanks Dave!
Friend you have to have some self control then
I have to pay the federal government 55$ and the state is refunding me 140$. So a net of 85$. Sounds like I'm doing my taxes right
Nagisa Furukawa issue is sometimes people don’t make the same amount year after year, me n my wife make the same n work same place I made 41 she made 27
In this area, but as long as your savings accounts are growing due to deposits, you're probably on the right track.
Standard deduction has gone way up... AND personal exemptions have been eliminated. Don’t forget that 2nd part. It’s very critical. It was the reason my taxes in 2018 went up compared to 2017. I know some people blindly speak positively about anything their party does in politics, but eliminating personal exemptions was a BAD aspect of this tax law. It caused taxes to go up for certain middle class families, including mine.
Penelope Guzman it finally helped us this year because we had a second kid in 2019. I’d guess most married couples with 0 or 1 kid saw basically no real difference in their tax burden as a result of this law, especially if they previously used itemized deductions. 2017 itemized+personal exemptions > 2018 standard deduction for us, so taxable income went up. Once the $2000/kid credits start to add up & counteract the elimination of personal exemptions, that’s when this law starts to save people $. For people with tons of kids, I’m sure it’s been great.
I work for the biggest utility company in the nation and they match 7% on 401k contributions. I calculated my allowances according to my pay and I was able to contribute 15% to my 401k and got back a 30% rate of return. All with the extra allowance money I was getting back every paycheck. It’s getting your money to work for you. it’s just a smart alternative than getting back zero % and getting taxed hard all year round.
I disagree. I would rather get a lump sum back than a little bit that will just be end up spent on small expenditures.
My problem with withholding is that it's not granular enough. I've gone back and forth on this. If I use Single 0, I get around $1K back (sometimes more, sometimes less). If I use Single 1, I wind up OWING about an additional $200. I agree with what Dave says here but I really don't like the feeling of paying more after I've paid all year! I hope this new IRS plan works better.
Richard Forester I have always done Single and 0. By the time I get to the W-4 after doing a bunch of paperwork, I get frustrated.
Try single .5 🙃 lol
I agree, its really hard to get your tax return to 0, if you are within $1000 I think its good enough.
Owing $200 sounds good...you got a free loan from the government...and got a little more in each check.
You'll hardly get it right. So many variables throughout the year that you can't pinpoint it EXACTLY to owning/getting zero.
Turbo tax is still better then how most people try and explain it.
A couple times I've tried adjusting my withholding to be just a few hundred more than what I owed the year before. Both times I got burned and had to pay a thousand or two in April. It sucks.
JavaMan this was the worst advice ever. Most people have the same issue you did.
I had that issue!
We can’t seem to get it right either.
so?
I've lived long enough to finally hear D. R. Compliment the IRS!!! ROFDLMAO
Honestly a tax return is better for some people. Some people don’t have the self control to save the money
That's the truth I was just thinking the same thing!!
True, but they also don't have the discipline to better their lives with the refund either. In other words, blow it now or blow it later.
A tax return is the form we file. A tax REFUND is what people receive when they over-withhold.
So the people who can’t be trusted to save $38 a week can be trusted with $5000 check?
Joe Matarazzo thank you! idk why but that mistake always irks me
Mortgage interest, property tax, dependents, there’s a lot of factors to a deductible not just salary.
And Dave gets thousands for these short snippets of his radio show....
He knows how to make a buck.
Unless you have more than $24,800 as a married person, you won't be able to itemize. Dependents are taken care of on the new W4.
In Canada, you can’t deduct mortgage interest. Must be nice
Thank you for stating this obvious fact. I am furious when someone is so proud of how much they get back.
Whoa, knew about the calculator but haven't read or heard ANYTHING in media about the new form. It's so much better! Can't believe Dave is the only one talking about it! Actually no, that checks out. Of course he is :) Thanks Uncle Dave!
A friend of mind brags how he makes 10-15 k on his tax returns. I've told him countless times how silly that is and glad that you explained it better than myself.
They just don't get it. I have been having this discussion with coworkers for over forty years.
@@reniehandler2595 I agree and it's extremely difficult to change their mind.
I am so lost!!!
I was always told to claim 0 (I am 20 years old, a cosmetologist, no student loans, living on my own in an apartment). What should I claim now/how do I figure out what I should claim on my taxes? I'm so sorry if this is a dumb question but I am new to Dave Ramsey and this world.
I WISH they taught us this stuff in school.
Just go to the IRS estimation tool like Dave says. At the end, after plugin your numbers, move the bar to the left and it will tell you how much and how to modify your W-4.
Alberto Gonzalez Thank you!
@@Munchthesquirrel it does depend where you're at in life, who's advice to follow. Do you have the emergency fund to handle owing the IRS right now?
DR's advice is meant for his listeners with an emergency fund, at least $1,000, if not 3-6 months' pay - definitely not living paycheck to paycheck. It will save you money in the long run, but may leave you owing a few hundred in April. It is, after all, an estimate. If that would kill you right now, start with the Baby Steps first - _then_ you can fix your W-4 when you're ready.
The advice you heard before to put 0 is intended for broke, undisciplined people (the majority), who are living beyond their means, and count on that big refund to save them after the holidays. You're paying "stupid tax" but April won't break you. It's like a savings account (1 year CD) you're forced to use, but with no interest. It's lousy, but broke people almost need it!
I encourage you to learn more from DR, Chris Hogan, Minority Mindset, Graham Stephen, Tony Robbins, and more. They don't always agree on everything, but they share a similar, practical foundation:
1. Cut costs, live frugally, sell off all you can, and cancel subscriptions. Get aggressive!
2. Save a safety net in case your car breaks, your pipes leak, or your pet gets sick ($1,000 minimum, maybe $2,000).
3. Pay off high-interest debts aggressively.
4. Save 3-6 months' pay for big emergencies.
5. Keep learning, and start investing.
Personally, I did it both ways and I think it's better to claim 0 on your payroll taxes so you have a nice return, and then you can use that to invest. And, just in case, you have some cushion to fall on if you made extra income from a second job or whatnot.
@@pondboy3682 Wrong man. If you use the updates IRS tax calculator and enter ALL of the correct information, its going to get you owing/receiving close to 0$ and thats the goal. If you are receiving a refund of 4 figures, youre doing something wrong. Why should I let the government take MY money from each check, to then give it back to me at the end of the year like its some gift? That was mine to begin with.....
The only reason why I do it is because if I work over time or got a second job. I don’t want to owe the government more money later
Same here.
Withhold the right amount and you won't owe.
You can’t store your money in a regular bank for much more than 0%. I used to overwithhold, get a big refund and then pay upfront for my heating oil for the next winter for a nice discount. And yes, I do have a problem saving on my own. This worked for me.
Yes, for lazy people, it's a nice crutch. High yield savings accounts TODAY will get you a 5% return with monthly payouts. It must suck to be inferior.
ITS MY MONEY AND I NEED IT NOW!
They also make sweet, sweet interest on our 0% interest savings accounts. We, of course, see none of that.
Get a $1000 tax return at 2% interest you are talking an extra $20 that youll have to pay income tax on! Its no big deal!
@@Thetatraderz I think you missed the entire concept of the comment. But I will briefly explain it, rather than just leave it be. That "extra $20" that would only generate very, very little additional taxes for most people, multiplied by millions of working Americans, is a lot of money. There are more issues than that which are related, but if this point makes little sense, I daresay the others would not either.
At least you told the truth not like these millionaires spreading false info about these new tax laws because it doesn’t benifit them. You a real one ☝️💪🏽
I've been claiming 10 deductions for years. Good IRS personell schooled me, HR always looked at me crazy "are you sure?" I'm absolutely sure I don't want to pay more.😂😂😂😂
I had the same thought when I set mine to 50 since my federal tax liability is negative lol.
Same here. HR lady told me 11 deductions was too high and I probably still need to adjust a little higher.
Ms. Price People tell me oh my You claim 4 dependsnts?
Yeah I’m gonna claim more next year too cause I’m still getting massive refunds.
But you don’t even have any kids or a wife!!
Facepalm
@@Al-eg4bm same I claim 4, have 2 kids and mortgage and I'm getting almost 5k on my federal return
please can you tell me how you claim more deduction?
I know he tries to give advice for the majority, but I cringe when he implies a big refund automatically means you had too much withheld.
I have nothing withheld and with deductions and credits still get a lot of money every year. I know many others who are the same.
You are implying that the IRS just sends you a check every year, just for being a nice guy. Of course we want to know how.
I'm not implying that, I said with deductions and credits. Deductions getting income low enough to owe little or none and credits adding to what they send.
Shouldn’t you know what your deductions and credits at the beginning of the year?
Yeah, that's why I have $0 withheld from my paycheck, because I know I won't owe.
i do the same thing, but i always have to cut a big check for social security anyway, in spite of deductions
I did something smart. I moved my wedding from January to December, and now I can claim the whole year as married instead of single. Tax refund
Doesn't matter when you get married - the IRS will consider you to be married the entire year.
texastigress if I had kept my marriage date in January I would be able to adjust my withholding for 2020, and 2019s taxes as a single person would be locked in. Having my wedding in December allows me to adjust my filing to married joint filing, which gives me back a ton of money since I’ve withheld as a single head of household for 99% of 2019, and then I can adjust my withholding for 2020.
@@texastigress Yes, but doing it in Dec gave them àn entire extra year of the tax benefit.
According to the statistics, you will most probably be divorced within 5 to 10 years.
Most people pay less tax when they are married and file accordingly. Some pay more tax when they are married.
Another thing to consider. You do not have to equally withhold all year. IF you are disciplined and do NOT live paycheck to paycheck, THEN you can pay more toward the end of the year. Know your tax liability and at the end of each quarter, check to make sure you are on track to withhold the minimum amount by the end of the year. If you need to bump it way up in Dec, you can. You just tell your employer to take out a huge lump sum of additional withholding for one or two paychecks.
Thank you so much for this video. We'll now have $550 more a month in our pay check! We adjusted everything.
It’s like they don’t know it’s a tax RETURN.
Since people barely save anything, isn't it still a good idea to have the government do it for them.
Let's not lie to ourselves. The 5k they got back wouldn't be there at the end of the year.
I agree with that Jean...and most average returns are under $1k, not $5k....how much interest would you make in a savings account with $1k?
And what Dave fails to mention, is that money isn't held by the IRS the whole year...it is slowly paid to them throughout 12 months.
@@Austenfan177 You rock girl!
Depends what happens to the refund when they eventually get it. If they’ve got the discipline to invest/save the refund, they probably would’ve also done that each month.
I don't lie to myself, I know that I'm bad with saving and so when I get a few thousand back each year I feel like it forced me to save it.
@@Austenfan177 If they had a budget in the first place, they wouldn't even spend the extra 80 per paycheck. Almost every person who spends all of their paycheck amount don't budget. I know of a guy who had 50k given to him through an inheritance and spent it all because he thought he got rich. He definitely didn't budget.
A large portion of tax returns pay zero taxes but will get thousands because of child tax credits and EIC. MOST people pay zero and get a return.
Getting a large tax refund, especially in the thousands = being stupid with your money. You give the government too much money.
Great info, 100-200$ per month for some people and a life changing
I try telling people to stop claiming 0 on their taxes. I tell them they need to just keep the money and stop loaning it to the government. I think the new W-4 will help with this as well.
As a single tax payer living on my own, I know to always claim 0. It’s safe and prevents hardships if I owe. Things can happen to make you owe money like claiming dependents, transferring IRA money to another job, or gaining money from stocks. Imagine paying 2 years of taxes at once. Singles in apartments don’t get no love from the government. I’ll stick to claiming 0.
Usually that doesn't work out ideally. Is someone claiming you as a dependent? If not, you can calculate how much you should owe in taxes pretty easily if you just have 1 job and can avoid the problem you're talking about. If you have multiple sources of income or are self employed that's more difficult so unless you're hiring someone to help with your taxes, I can understand wanting to stay on the safe side.
Rebecca A. No one is claiming me as a dependent. Good Thing! Lol That would have a worse affect. You are completely right about that and being able to estimate your return. Your paychecks would be bigger but at a risk. I’ve seen mistakes made by employers on other people taxes that wasn’t caught until tax time. It was vary devastating and they couldn’t pay it back.
@@trainsandlocomotives That's definitely unfortunate to say the least. I guess that's what Dave means when he talks about normal people, an unexpected bill comes up (car repair, tax payment, etc.) and it throws everything off for them because they have little or no savings. Personally, I'm saving a lot of my money (my husband and I basically live on his income and we save mine). I know that's not possible for everyone, but I think if you have a full emergency fund and put a little thought into your taxes if they're simple then a tax bill shouldn't be a problem. But of course, every situation is different. It looks like at the least what happened with your coworkers taught them (and you) to try to prepare for the possibility of unexpected expenses. That in itself is a pretty valuable lesson. Good luck with everything!
I was justing talking about tax refunds on my channel. the goal is to not owe the IRS money as well the IRS not owing you money. That refund is basically an interest free loan to the government!
My dad explained this to me years ago, but when i try to explain it to people they think I'm crazy they just dont get that it's already their money they're just getting "reimbursed"
Dave Ramsey just called out the whole country
my tax refund is going straight into my dividend stock portfolio
Mine will also be invested.
Awesome it’s my final blow against credit cards!
Could've been there all year if you'd up your withholdings and kept more on your paychecks ;))
Mine will pay off the car. No more debt for me.
K Dilli that’s what i just learned from watching this video... lol looks like I have some adjusting to do
New W4 not so good, payroll is taking out what will be $5,500 too much out of pay.. they say IRS table tells them to do that. IRS told us no, they should only take $1200 out this year. Nobody will fix it, so we claimed exempt and sending in payments. Everything was fine until new 2020 W-4.
The DC government actually taxes your refund, as if it were income, and not what was owed to you. This is actually double taxing.
Oh man, so close to the goal this year. Tax return under $160.
you need to teach us all then...haha...one day my wife and I will get there,
👍🏻💪🏻
$687 for 2019. Going to use this calculator when I get home after work.
@@DrFuzzyxFuzz go to u inversity and take a ecomics class.
@@aaronsalentine7876 What are you implying?
Don’t most people who get big tax returns usually get it because of the “EIC”. They are paid out for their lack of money, I have a sisters-in-law that no lie. Made $14k one year and got a tax return of $10k. Claimed two kids. It’s a crazy system. I hate tax time. But everyone on my Facebook loves it 🤦🏾♂️
What is EIC? How is that possible to get a 10k tax return when you make 14?
@@BigEvan96 EIC = earned income credit
@@WhittsEnd Yeah I looked it up. Interesting. I wish they would have taught us this in highschool.
this makes so much sense 😮. if your getting a couple thousand dollars with your tax refund then that means you could be making so much more money on your paycheck.... so if you get $7,000.00 for your refund... divide it by 12(each month) that's $583 and some change a month! 😳😱😱😱. im going to need to do some changes to my forms.... i never claimed more dependents because i thought it was illegal, but i guess not! you learn something new everyday 👍🏽😊
As a business owner with pass-through entities in multiple states, the new tax plan needed up being a net positive. Huge benefit from the exclusion of 20% of pass-through income, but took a huge hit from the changes in SALT. Always had huge itemized deductions due to tax estimates and real estate taxes in multiple states...now they offer no tax benefit. I believe the reduction in corporate rates, and the exclusion of 20% of pass-through earnings was Trump's way to counter the increased burden of Obamacare. Increase in healthcare premiums cost one of my companies about $60k, and the tax changes offset most of this.
I took Dave's advise couple of years ago, and lowered my withholding, so my tax return would be right around $500. Then I contributed more to ROTH instead of 401k, which made me OWE tax. I didn't realize this, and ended up owing tax. I paid the penalty and interest. OUCH.
Make sure you put withholding just enough, so that you get about $1000+ tax return.
@jwc did u figure out 'what about contributing to a roth' had you owing tax?
@@Sexy40baby1 I don't believe contributing to the ROTH caused the issue. Failure to withhold the correct amount for their household situation is what caused the problem. Dave's advice is always just 1 piece of the formula, he tells me topics which I need to learn more about. I recommend using the calculator to assist in your w4 modifications.
But when you pull your Roth money out you won't owe tax. So you paid the tax now I stead of a couple decades down the road
@@outdoorsnevada4138 Good point. If one expects to be in a hire tax bracket when you get older, IMO it makes more sense to tax IRA savings now, rather than later.
I withhold 2-myself and my child but I get a refund for EIC because I have a child under 18 🤷🏾♀️
We usually get a refund of ~$300 from federal and owe ~$250 to state, so they cancel each other out.
Just because you received a big refund, that doesn’t necessarily mean you over paid. Most people don’t even have a tax liability assessed and qualify for a refundable credits (credits that are refundable for cash if no tax liability is assessed; think Child Tax Credit and Earned Income Tax Credit). This can easily be in the thousands of dollars as many states also have identical credits available under their respective departments of revenue.
This mostly applies to median income earners. When you're low income, you'll get a refund no matter what
Agreed. But what brackets would determine that?
@@FreshKicks4545 you can find the EITC income tables on the IRS website
Oh okay! Thanks for clarifying! I thought I was missing something.
It's not a refund if you didn't pay in.
Where ever I get my refund I always put it in mutual funds 😂 and overtime I’ve always got a good return on my investments overtime 😂
Finally!!! It's about time we can properly calculate this. Thanks, Dave!
10 years ago we found out we were having twins (from 1 to 3 kids). Before they were born, we sold a smaller car and upgraded to a minivan - a necessity with 3 kids 2 & under, we paid off the remaining loan balance immediately with that tax return. Without that “forced savings interest free loan” I would not have been able to pay off the loan immediately...buying the van was something that was needed but not planned prior to finding out about the twins.
I’ve certainly made financial mistakes but also feel we are wise.
I have 40% (not a typo) going into retirement (16% is from employer) and have a $1.2 net worth and I’m 42. I’m a huge Dave fan but I disagree a little on this one.
Do what works for you people.
I don’t think a refund is the worst thing in the world.
I never said the IRS is a savings account, I said a little refund isn’t the worse thing in the world. We had not planned on purchasing the van, but life occurred and it was nice having that forced savings- would not have been able to pay off that van in full otherwise as we had not been planning on it. As previously stated, I have 40% going into retirement with a reasonable net worth.
I never adjusted my withholding but i used to get about a $1,200 return. Since having health care under the market place I've gotten back $400. I won't adjust it because I don't want to owe them. I'm not a genius and I don't have a tax professional so I'm just going to ignore it 🤷🏽♀️.
“Nut Burger Laws”
I like it
This year being single and 1 kid left and in college. am actually putting an extra 50 dollars to pay for her college. First generation. And I don't wan her with high loans. Not sure if am doing the right thing. I have done things the wrong way and now that I been hearing you ,Oneal and Chris. I Made so many changes. Thank you all
When I first moved to the States, after a year of working, my coworkers (18-20 yrs mainly) kept telling me I would "get a refund because I worked". I'd never filed taxes before and this was my first job as a teen so I was confused. Why would the gov't just give me money although I've already been paid for my service at my job? Checked the IRS website for info and finally understood. Turns out I was just getting back the excess money the gov't took in taxes. Point is, there are still people who don't even know that a tax refund is not free money the gov't offers because you have a job 🤦🏿♀️
Under the Obama administration, I owed $2,000+. After the tax changes, I received a $1,700 refund. That's a huge difference.
Same here. The most taxes I ever paid was under the Obama Administration.
Yea thanks to it the U.S is drowning in debt even more. Greedy politicians sinking our future generations more into debt.
You understand, don't you, that whether you owed money at the end of the year or whether you got money back has nothing to do with how much tax you paid, right?
Vote Republican for lower taxes, Democat for higher taxes.
Andres jimenez Don’t worry... the U.S. economy is on “Rice & Beans” and in the ‘Baby Steps’ right now but the next term we are going to be in a place to “Give & Live Like No One Else!!” It’s going to be Amazing!!
The title of the video isn’t addressed.
Well it kinda was. Because the W4 has dramatically changed this year but I feel like DR didn't address it in a very concise matter. Don't get me wrong I love me some DR but this video was too much rant and enough explanation. I googled and found a great article explaining it and we now adjusted our W-4
PlethoraShae It was - the biggest one is the standard deduction has increased. And the rate decreased.
This is why I have a hard time with this guy. I think he likes hearing the sound of his own voice. 😒
Actually it was. He just did not go in-depth.
The keep the titles short to get more clicks. Most people with ordinary employment income and/or kids have a lower tax burden due to the new tax laws. There are a few reasons for this: 1. The marginal rates decreased. 2. The standard deduction increased and 3. The child tax credits increased. If you don't adjust your withholding you might find that you get a bigger refund than expected and it's 'dumb' to let the government hold onto your money and then give it back to you with no interest.
Thank you for everything you do sir. You’re a good man.
I understand what he’s saying, the money could be better used now than in a lump sum later. But I’m terrible with numbers and I’ve heard too many horror stories of friends typing the wrong thing into TurboTax and they miss out on a chunk of their return. I just withhold whatever is normal, and then pay H&R Block $60 or so to go through the headache for me so I don’t have to worry about it.
My refund is always 5 grand lol oh man.. wish I knew this sooner
Tax return going to my debt lol
Yup, same for me. But, changing my withholding's in the morning so I get my money in my paycheck to pay down that debt faster this year.
Topsy Kretts ,if you would not let the Govt. keep your $$$ all yr long, maybe you could pay off your debt sooner and not get deeper in the hole with the high interest they tack on.
@@Boobtube. Yeah that's possible but other expenses pops up. Especially, when you a family and a home. Me and my husband paid our debt off with a couple of our refunds
@@0024811 its your $$$.. why let the govt. keep it all year? Why let the govt. be your savings account??
My mom is a CPA, we’ve been getting questions on this for weeks. The program is extremely confusing, and we’ve been trying to understand it just like you guys are. What makes it difficult is for people who still want a refund. They have to work the formula backwards.
Dave says I should get a tax pro. Sounds like good advice, especially since I AM a tax pro - I am an Enrolled Agent licensed by the IRS. Actually, IMHO most people who get large refunds get them because of tax credits, not withholding. The old tax tables were inaccurate because the instructions for how to use them when there was more than one income in the household were either not there at all or were hidden in the 4 pages of legalese instructions or were simply incomprehensible. Simply put, until the 2019 W4 instructions came out, each employer withheld as if that employee's pay was the only income in the family.
I always pay at the end of the year. Gives me more to invest.
I like getting money back at the end of the year
I did the calculation on the IRS website. It indicated I needed to change my withholding, BUT the new W4 form doesn’t provide any place to make an adjustment. In my case, the instructions indicate that I write my name, contact info, sign then date. That’s it. No numbers or indications of allowances. That makes no sense. It’s like sending a blank sheet to the government. I’m not going to do that. 🙄
I just got my first pay check after changing my withholding form. I'm transferring the little bit I am receiving more per week into my savings account. We will see what happens at the end of the tax year.