- The Saver's Tax Credit provides a unique opportunity for workers of low and moderate incomes to put money aside for their futures and have that money deducted from their taxable incomes. This tax credit rewards workers who participate in an approved retirement fund, and allows those workers to deduct a percentage of that money from the taxes they would otherwise owe. The percentage that can be deducted is determined on a sliding scale, and the income levels change now and then. Workers who want to use the Saver's Tax Credit as a budgeting and financial planning tool can check the IRS website for current eligibility guidelines.
- If you get a big fat refund check every year, you may think you are one step ahead of the IRS. But in fact, a refund check means you have been lending money, interest-free money at that, to the federal government all year long. Adjusting your withholding levels by contacting your employer and filling out a new W-4 form is an excellent way to put more money in your pocket and make budgeting easier.
To get the maximum benefit from your withholding changes, it is important that you divert any extra money that lands in your paycheck to an emergency fund or investment. This simple strategy can allow you to build up considerable wealth over time, and you will have the IRS to thank. - Another way the IRS makes budgeting easier is by allowing you to take money right off the top--before you get a chance to spend it. By signing up for your employer's 401k program, you will be able to reduce your taxable earnings by putting money away for retirement. One of the things that makes the 401k plan such an attractive option for many workers is that the money comes right off the top of your paycheck, just like your tax withholding. This forces you to live on what is left, and living within your means is a key part of the budget process.
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