An interesting item on MarketWatch today says that if you got an abnormally large refund check or were surprised by how much you owe, that something could be awry with the amount of taxes your employer withholds from your paycheck.
Ideally, you should owe Uncle Sam a small amount each year come tax time. If you’re getting a large refund, you’ve given the Internal Revenue Service an interest-free loan for the previous year – and we’re sure you could have come up with a better use for that money than that. On the other hand, if you owe more than 10% of your total tax bill, you could owe an interest-charge penalty for failing to cough up enough in advance of filing your return. And clearly, that’s not an ideal situation either.
You’re encouraged to check how many exemptions you claimed if you suspect that your bill is too big. Income from self-employment or private investment can also impact your refund or lack thereof. Conversely, action most likely also needs to be taken if your refund is too high.
“While tax underpayments can be a nasty surprise, you should be almost as distressed to discover you’ll be getting a massive refund,” the author Bill Bischoff states.
For more reading on this vital information head over to MarketWatch.