Also, the article is about the normal tax refund, not the extra $600 or whatever they're supposedly giving out this year.

Not money. $15 million. Money is what you take to the grocery store. It's what you get out of an ATM. $15 million is not money, it's a motive with a universal adapter on it.

But my irresponsible heart says $600 is a drop in big ass bucket full of holes... So why not buy a new flat panel TV with it instead!!!

And thus an internal battle begins...

Yep, THAT makes sense...

Not saying it'll work, because it won't in the long run, but don't get excited if banks and brokers report an increase during May and June.

With dog food and cheese costing what it does today, it's money that would get spent anyways.

Fnarf, explain. I've recently been wanting to learn more about the withholding process, but isn't there sort of a fine line between taking 1 allowance and having a refund, and taking 2 allowances and owing money at the end of the year?

I suppose if you're truly smart, you would not have anything withheld, put the money in savings, and collect interest on it instead of letting the IRS do that (filthy swine!), but who the hell does that, really? Especially if you're pretty poor, the interest gained from the money would be pretty negligible, and you would be tempted to spend it and then have issues paying at the end of the year. In some sense, it would in that case be "smart" to let your employer/IRS manage the money for you.

Unless you have some mix of W-2 and 1099 (independent contractor) income, taking one exemption on your W-4 should keep your federal withholding at around 10%, which for most people should be sufficient to cover their annual tax obligation.

I personally, would never advise anyone to take 2 exemptions, for the obvious reason that, while it may add money to your paycheck, you're just going to have to turn around and pay it to the IRS in the spring anyway, and unless you can actually squirrel it away in a savings account - AND KEEP IT THERE - you're not really going to get that much extra benefit out of it.

And the sad fact is, most people so impoverished they need to reduce the amount of their federal withholding by taking extra exemptions on a W-4 are probably not going to be in a position to save the roughly 10% or so of their income they would need to cover their tax obligation, and so they inevitably end up not only owing a big bill come April 15th, but probably won't have the cash set aside to pay it, either.

Which means, not only do they owe the federal tax, but if the bill is large enough, they could also get dinged for quarterly advance tax payments, the first of which is due on April 15th - natch, plus penalty for late payment if they can't cough it all up by the dealine, PLUS the interest the IRS is going to charge them if they have to pay in installments.

I always tell the people for whom I do tax seminars and returns that, despite the apparent financial hardship, it's way better to just pay the federal withholding from your regular payroll, and at least maintain parity, than to sacrifice the tax for a bigger take-home check, since in 90% of cases they won't have the financial discipline to save it, because there will always be some pressing need to spend it.

And fnarf does have a point: people who get big refunds are basically allowing the U.S. Government to collect interest on money THEY could be collecting interest on, or spending on other necessities during the year, instead.