For those of you who jump for joy at the thought of a big tax “refund” check, you’ll be plenty happy in California since they will be increasing the withholding amount 10 percent this weekend. The state is going to borrow money from you interest free – money you do not owe in taxes – and you might get it back later. Take action – adjust your withholding now!
I say you might get it back since the state has a history of dishing out IOUs California banks are hesitant to accept.
I have a huge issue with people who are happy to get a big tax refund. I actually get pretty mad at myself if my refund is more than $250 since I try to make adjustments to the amount of withholding during the year. I’d much rather have the capital in my possession and working for me instead of providing the government an interest free loan.
Starting Sunday, cash-strapped California will dig deeper into the pocketbooks of wage earners — holding back 10% more than it already does in state income taxes just as the biggest shopping season of the year kicks into gear.
Technically, it’s not a tax increase, even though it may feel like one when your next paycheck arrives. As part of a bundle of budget patches adopted in the summer, the state is taking more money now in withholding, even though workers’ annual tax bills won’t change.
California taxpayers generally pay between 6 percent and 10.55 percent. It’s a graduated tax where the more you make, the more you pay. As of the beginning of the year, married couples who made between $74,466 and $94,110, paid $2,758.17 plus 8.25 percent of whatever they made more than the $74,466.
The extra withholding may seem like a small amount siphoned from each paycheck, but it adds up to a $1.7-billion fix for California’s deficit-riddled books.
From a single taxpayer earning $51,000 a year with no dependents, the state will be grabbing an extra $17.59 each month, according to state tax officials. A married person earning $90,000 with two dependents would receive $24.87 less in monthly pay.
This really does set a bad precedent, but there is a way for California taxpayers to put the breaks on the plan … they can adjust the withholding amount with their employer to ensure the state is not getting an interest free loan. Take steps to ensure you owe the state of California a few hundred dollars at the end of the year instead of the state owing you hundreds, or even thousands of dollars.
I wonder how they would feel if you owed them, and presented the state with an IOU next April?