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The W-4 - A Source for Debt Payments?
Most consumers know that they can avoid owing taxes each April 15 by adjusting their W-4 form. By adjusting their withholding, most consumers can ensure that enough taxes are taken out each pay period so that no additional payment is necessary at filing time. However, some consumers have more money than necessary withheld. Many say they like to have the larger refund check in the spring. They consider it a kind of savings plan. But consumers with debt problems should consider using that extra withholding money to pay down their debts instead. "Consumers should not have more money than necessary withheld each pay period, even though a large refund check seems like a good thing," says Durant Abernethy, president of the National Foundation for Consumer Credit. The foundation is the nonprofit umbrella organization for the more than 1,100 Consumer Credit Counseling Service (CCCS) offices nationwide. "Wise money managers apply that extra money each payday throughout the year toward a savings or investment account or they use it to retire debt." If you are searching for ways to get payment from a debtor, suggest the person review his or her withholding. The extra five dollars a week that goes toward that large refund check each year, could mean twenty dollars a month to pay down a debt owed to you instead. Explain that a large check next year won't mean much if the person is in serious debt when the check arrives.
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